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(a) (i) Expected level of demand Qd = 200 – 370P + 180Y P = €4.50, Y = 28.5 (€28,500) Qd = 200 – 370(4.50) + 180(28.5) Qd = 3,665 (ii)Price elasticity of demand using point elasticity for... mula: PED = dQ / dP * P/Q = -370*4.50/3665 = 0.45 The price elasticity of demand is elastic because it has an elasticity value that is less than one. (iii) Income elasticity using the point elasticity formula: IED = dQ / dY * Y/Q = 180*28.5/3665 = 1.40 The income elasticity is that of normal goods because it has an elasticity value that is positive and the product is a luxury because it has an elasticity value that is greater than one. (b) Salad (complement) is consumed together with frozen pizza and therefore its price will impact on the quantity demanded of Frozen Pizza. When the price of salad, especially Jersey salad, increases, the quantity of product demanded would decrease and if the price of the complement decreases, the demand quantity of frozen pizza would increase. Other types of pizzas such as Portobello pizza, Pita pizza, and Zucchini pizza are substitutes of frozen pizza and would therefore would affect the demand quantity of product. When the price of the substitute increases, the quantity demanded of frozen pizza would increase and when the price of the substitutes decrease, the quantity demanded of frozen pizza would decrease. (c) (i) t ratio of price, P = 370/ 230 = 1.61 [Show More]

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