Using Excel, Big Pies Pizzas estimates the log- linear weekly demand function for their pizza to be ln Q^d = 8.23 - (1.50 × ln P). Which of the following statements is true? A)The price elasticity of demand for Big Pies Pizzas increases as the price of the pizzas increases. B)The demand for Big Pies Pizzas is elastic. C)The demand for Big Pies Pizzas is inelastic. D)The price elasticity of demand for Big Pies Pizzas decreases as the price of the pizzas decreases.

Question

Quizplus · Accepted Answer

The logarithmic demand function can be used to find the price elasticity of demand using the formula: Price elasticity of demand = (% change in quantity demanded) / (% change in price) Taking the derivative of the demand function with respect to price, we get: d(ln Q^d)/d(ln P) = -1.50 This means that a 1% increase in price will result in a 1.50% decrease in quantity demanded. Since the coefficient is greater than 1, we can conclude that the demand for Big Pies Pizzas is elastic. Therefore, Option B is correct. Option A and D are incorrect because they suggest that the price elasticity of demand increases or decreases as the price changes, which is not true in this case. Option C is incorrect because the demand is actually elastic.

Using Excel, Big Pies Pizzas Estimates the Log- Linear Weekly