A 5 percent increase in the price of pizza causes a 5 percent drop in the quantity of both pizza and beer sold. From this we can tell that the demand for both pizza and beer are unit elastic.

Question

Quizplus · Accepted Answer

The statement only directly indicates the price elasticity of demand for pizza is unit elastic (a 5 percent increase in price leads to a 5 percent decrease in quantity demanded). It does not provide information on the elasticity of beer demand, only that beer's demand is affected by the price of pizza, suggesting a cross-elasticity of demand between pizza and beer.

A 5 Percent Increase in the Price of Pizza Causes