15. Another supply and demand puzzleThe market price of pizzas in a college town decreased recently, and the students in an economics class are debating the cause of the price decrease. Some students suggest that the price decreased because several new pizza parlors have recently opened in the area. Other students attribute the decrease in the price of pizzas to a recent increase in the price of beer. Everyone agrees that the increase in the price of beer was caused by a recent increase in the price of grain, which is not generally used in making pizzas.The first group of students thinks the decrease in the price of pizzas is due to the fact that several new pizza parlors have recently opened in the area.On the following graph, adjust the supply and demand curves to illustrate the first group’s explanation for the decrease in the price of pizzas.Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther. On the following graph, adjust the supply and demand curves to illustrate the first group's explanation for the decrease in the price of pizzas.Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps backto its original position, just drag it a little farther.SupplyDemandSupplyDemandQUANTITY (Pizzas)The second group of students attributes the decrease in the price of pizzas to the increase in the price of beer.On the following graph, adjust the supply and demand curves to illustrate the second group's explanation for the decrease in the price of pizzas.PRICE (Dollars per pizza) The second group of students attributes the decrease in the price of pizzas to the increase in the price of beer.On the following graph, adjust the supply and demand curves to illustrate the second group's explanation for the decrease in the price of pizzas.SupplyDemandSupplyDemandQUANTITY (Pizzas)Suppose that both of the events you have just analyzed are partly responsible for the decrease in the price of pizzas. Based on your analysis of theexplanations offered by the two groups of students, how would you figure out which of the possible causes was the dominant cause of the decrease inthe price of pizzas?If the price decrease was large, then the supply shift in the market for pizzas must have been larger than the demand shift.Whichever change occurred first must have been the primary cause of the change in the price of pizzas.O If the equilibrium quantity of pizzas decreases, then the demand shift in the market for pizzas must have been larger than the supplyshift.If the equilibrium quantity of pizzas decreases, then the supply shift in the market for pizzas must have been larger than the demandshift.PRICE (Dollars per pizza)

Supply and demand, in economics the relationship between the quantity of goods that producers want…

Answered: 15. Another supply and demand puzzle…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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15. Another supply and demand puzzle

The market price of pizzas in a college town decreased recently, and the students in an economics class are debating the cause of the price decrease. Some students suggest that the price decreased because several new pizza parlors have recently opened in the area. Other students attribute the decrease in the price of pizzas to a recent increase in the price of beer. Everyone agrees that the increase in the price of beer was caused by a recent increase in the price of grain, which is not generally used in making pizzas.

The first group of students thinks the decrease in the price of pizzas is due to the fact that several new pizza parlors have recently opened in the area.

On the following graph, adjust the supply and demand curves to illustrate the first group’s explanation for the decrease in the price of pizzas.

Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther.

The second group of students attributes the decrease in the price of pizzas to the increase in the price of beer.
On the following graph, adjust the supply and demand curves to illustrate the second group's explanation for the decrease in the price of pizzas.
Supply
Demand
Supply
Demand
QUANTITY (Pizzas)
Suppose that both of the events you have just analyzed are partly responsible for the decrease in the price of pizzas. Based on your analysis of the
explanations offered by the two groups of students, how would you figure out which of the possible causes was the dominant cause of the decrease in
the price of pizzas?
If the price decrease was large, then the supply shift in the market for pizzas must have been larger than the demand shift.
Whichever change occurred first must have been the primary cause of the change in the price of pizzas.
O If the equilibrium quantity of pizzas decreases, then the demand shift in the market for pizzas must have been larger than the supply
shift.
If the equilibrium quantity of pizzas decreases, then the supply shift in the market for pizzas must have been larger than the demand
shift.
PRICE (Dollars per pizza)

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