Economics

Price (dollars per pizza) Quantity demanded (pizzas per week) Quantity supplied (pizzas per week) 5 750 300 6 700 400 7 650 500 8 600 600 9 550 700 10 500 800 11 450 900 12 400 1,000 A market research team has come up with the demand and supply schedules for pizza in Cheeseboro. These schedules are given in the table above. Use these data to analyze the situation in the market for pizza. a) Draw a figure showing the demand curve for pizza and the supply curve of pizza. What are the equilibrium price and quantity' Ans: As shown in the graph, the equilibrium price is 8 dollars per pizza and the quantity is 600 pizzas per week. b) Suppose the price is $10. Describe the situation in the market and explain how the price of pizza adjusts. Now suppose the price is $6. Describe the situation in the market and explain how the price of pizza adjusts. Ans : Suppose the price is $10, the quantity supplied exceed the quantity demanded, there is a surplus of pizzas. The price will fall to $8 to achieve market equilibrium. Then the price is $6,the quantity demand exceed the quantity supplied, there is a shortage of pizza. So, the price have to raise to $8 to achieve market equilibrium. c) The market research report also includes a prediction about the effect on the market for pizza in Cheeseboro of a recent news published in Cheeseboro Herald. The Herald reported that pizza has been discovered to help prevent heart diseases. Unfortunately, your dog chewed up the report and all you can read about the prediction is "quantity... by 150 at each price." What does the prediction say' Use your graph to show the predicted effects on the market for pizza. What are the predicted equilibrium price and quantity' How will the market adjust' Ans : After the report show that pizza can help prevent heart diseases, the quantity demanded is increased by 150 pizza per week. The market shows that there is a market equilibrium if the price is set to $9 and the quantity of pizzas is 900 per week. the quantity demanded is change from D° to D¹, the price charge from P° to P¹, while the quantity supplied change from Q° to Q¹.