08.07.2022 - 05:47

# A market research team has come up with the demand and supply schedules for pizza. These schedules are given in the table below, use this data to analyze the situation for the market for pizza. A) Dra

Question:

A market research team has come up with the demand and supply schedules for pizza. These schedules are given in the table below, use this data to analyze the situation for the market for pizza. A) Draw a figure showing the demand curve for pizza and the supply curve of pizza. What are equilibrium price and quantity?

B) Suppose the price is {eq}$10 {/eq}. Describe the situation in the market and explain how the price of pizza adjusts. Now suppose the price is {eq}$6 {/eq}. Describe the situation in the market and explain how the price of pizza adjusts.

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 {eq}150 {/eq} 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?

• A) The demand curve for pizza will slope downwards from left to right since as the price of pizza decreases, the quantity demanded increases. The slope of the demand curve is steep indicating that the quantity demanded is highly responsive to price changes. The supply curve for pizza will slope upwards from left to right since as the price of pizza increases, the quantity supplied also increases. The equilibrium price is where the demand and supply curves intersect, which is at a price of {eq}$8 {/eq} and an equilibrium quantity of 200 pizzas. B) If the price of pizza is {eq}$10 {/eq}, it is above the equilibrium price, resulting in a surplus of pizzas as the quantity supplied is greater than the quantity demanded. The surplus will put downward pressure on the price of pizza, which will decrease until it reaches the equilibrium price. If the price of pizza is {eq}$6 {/eq}, it is below the equilibrium price, leading to a shortage of pizzas as the quantity demanded is greater than the quantity supplied. This shortage will put upward pressure on the price of pizza, which will increase until it reaches the equilibrium price. C) The prediction states that the quantity demanded for pizza will increase by 150 pizzas at each price. This means that the demand curve will shift to the right, indicating an increase in demand. The new equilibrium price will be higher than the previous equilibrium price since there is an increase in demand, leading to a price of {eq}$10 {/eq}. The new equilibrium quantity will be higher as well, reaching 350 pizzas. The market will adjust by increasing the price of pizza and increasing the quantity supplied until a new equilibrium is reached.