Question

26. David has a budget of £50 to spend at an Italian restaurant. A Vegetarian pizza has a price of £10 and a Pepperoni pizza has a price of £20. A. Fill in the marginal benefits values in the table below for Vegetarian and Pepperoni. B. Fill in the marginal benefit per pound for Vegetarian and pepperoni for each unit. C. What is the optimal combination of pizzas for David to purchase? D. Because of supply problems the restaurant has to put up the price of Pepperoni pizzas to £23 and this leads to a reduction in demand by 30%. Calculate the PED and suggest whether Pepperoni pizzas are elastic or inelastic in demand.

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