17. Another supply and demand puzzle The market price of calzones in a college town increased recently, and the students in an economics class are debating the cause of the price increase. Some students suggest that the price increased because several pizza parlors in the area have recently gone out of business. Other students attribute the increase in the price of calzones to a recent decrease in the price of beer. Everyone agrees that the decrease in the price of beer was caused by a recent decrease in the price of hops, which are not generally used in making calzones. The first group of students thinks the increase in the price of calzones is due to the fact that several pizza parlors in the area have recently gone out of business. On the following graph, adjust the supply and demand curves to illustrate the first group’s explanation for the increase in the price of calzones. 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. DemandSupplyPRICE (Dollars per calzone)QUANTITY (Calzones)Demand Supply The second group of students attributes the increase in the price of calzones to the decrease in the price of beer. On the following graph, adjust the supply and demand curves to illustrate the second group's explanation for the increase in the price of calzones. DemandSupplyPRICE (Dollars per calzone)QUANTITY (Calzones)Demand Supply Suppose that both of the events you have just analyzed are partly responsible for the increase in the price of calzones. 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 increase in the price of calzones? Whichever change occurred first must have been the primary cause of the change in the price of calzones. If the equilibrium quantity of calzones increases, then the supply shift in the market for calzones must have been larger than the demand shift. If the price increase was large, then the supply shift in the market for calzones must have been larger than the demand shift. If the equilibrium quantity of calzones increases, then the demand shift in the market for calzones must have been larger than the supply shift.

17. Another supply and demand puzzle The market price of calzones in a college town increased recently, and the students in an economics class are debating the cause of the price increase. Some students suggest that the price increased because several pizza parlors in the area have recently gone out of business. Other students attribute the increase in the price of calzones to a recent decrease in the price of beer. Everyone agrees that the decrease in the price of beer was caused by a recent decrease in the price of hops, which are not generally used in making calzones. The first group of students thinks the increase in the price of calzones is due to the fact that several pizza parlors in the area have recently gone out of business. On the following graph, adjust the supply and demand curves to illustrate the first group’s explanation for the increase in the price of calzones. 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. DemandSupplyPRICE (Dollars per calzone)QUANTITY (Calzones)Demand Supply The second group of students attributes the increase in the price of calzones to the decrease in the price of beer. On the following graph, adjust the supply and demand curves to illustrate the second group's explanation for the increase in the price of calzones. DemandSupplyPRICE (Dollars per calzone)QUANTITY (Calzones)Demand Supply Suppose that both of the events you have just analyzed are partly responsible for the increase in the price of calzones. 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 increase in the price of calzones? Whichever change occurred first must have been the primary cause of the change in the price of calzones. If the equilibrium quantity of calzones increases, then the supply shift in the market for calzones must have been larger than the demand shift. If the price increase was large, then the supply shift in the market for calzones must have been larger than the demand shift. If the equilibrium quantity of calzones increases, then the demand shift in the market for calzones must have been larger than the supply shift.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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17. Another supply and demand puzzle

The market price of calzones in a college town increased recently, and the students in an economics class are debating the cause of the price increase. Some students suggest that the price increased because several pizza parlors in the area have recently gone out of business. Other students attribute the increase in the price of calzones to a recent decrease in the price of beer.

Everyone agrees that the decrease in the price of beer was caused by a recent decrease in the price of hops, which are not generally used in making calzones.

The first group of students thinks the increase in the price of calzones is due to the fact that several pizza parlors in the area have recently gone out of business.

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

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.

DemandSupplyPRICE (Dollars per calzone)QUANTITY (Calzones)Demand Supply

The second group of students attributes the increase in the price of calzones to the decrease in the price of beer.

On the following graph, adjust the supply and demand curves to illustrate the second group's explanation for the increase in the price of calzones.

DemandSupplyPRICE (Dollars per calzone)QUANTITY (Calzones)Demand Supply

Suppose that both of the events you have just analyzed are partly responsible for the increase in the price of calzones. 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 increase in the price of calzones?

Whichever change occurred first must have been the primary cause of the change in the price of calzones.

If the equilibrium quantity of calzones increases, then the supply shift in the market for calzones must have been larger than the demand shift.

If the price increase was large, then the supply shift in the market for calzones must have been larger than the demand shift.

If the equilibrium quantity of calzones increases, then the demand shift in the market for calzones must have been larger than the supply shift.

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