Part III: Elasticity | Part IV: Budget Constraint 8. Eric is having a party and has $120 to spend on packs of Soda (X) and Pizza (Y). Q1 - Q2 Pizzas are $10 each and packs of soda are $5 each. Midpoint Formula For Elasticity: E = P, - P2 a. Write Eric's budget constraint for pizza and packs of soda Pm P. = Initial Price P2 = New Price Pm = Midpoint of P, and P. = Pi+ P b. Sketch Eric's budget constraint 2 Q1 = Initial Quantity Q2 = New Quantity Im = Midpoint of Q, and Q, = 21 + 92 2 c. Suppose the price of packs of Soda increases by $1 and the price of Pizza increases by $2. Write and sketch Eric's new budget constraint. Point Price Quantity Elasticity Demanded A 30 B 28 C 8 26 D 9 24 10 22 11 20 12 18 5. Use the tables above to calculate elasticity at points B through F. Use the midpoint formula (i. e. . to find elasticity at Qa = 28 and P = 7, use Q1 = 30, Q2 = 26, P] = 6 and P, = 8.) 6. The equation for a demand curve is given by P = 100 - Qa- Calculate elasticity at Qa = 20. (Use Q1 = 30 and Q2 = 10 as endpoints.) 7. The equation for a demand curve is given by P = 10 - 2Q- Calculate elasticity at Qa = 3. (Use Q1 = 4 and Q2 = 2 as endpoints. )