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Problem: In one month, a Pizza Hut restaurant sold 3,500 personal pizzas at $3.50 per pizza. When this restaurant increased its price by 20%, its total revenue for the next month increased to $13,440. As a result of this price increase, however, the monthly sales of pop decreased from 3,500 cans to 3,000 cans.
Required:
Question 1: Find the price elasticity of demand for this restaurant's pizzas.
Question 2: Find the cross elasticity of demand for pop with respect to the price of pizzas. Comment on your results.
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1. Which one would have the lowest and which one would have the highest price elasticity of demand?
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