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 decrease in the price of hamburgers at local burger joints. Everyone agrees that the decrease in the price of hamburgers was caused by a recent decrease in the price of ground beef, which is not generally used in making pizzas. Assume that pizza parlors and burger joints are entirely separate entities-that is, there aren't places that serve both pizzas and hamburgers. 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. Supply Demand Supply Demand QUANTITY (Pizzas) PRICE (Dollars per pizza) 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 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. If the price decrease was small, 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. PRICE (Dollars per pizza)
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 decrease in the price of hamburgers at local burger joints. Everyone agrees that the decrease in the price of hamburgers was caused by a recent decrease in the price of ground beef, which is not generally used in making pizzas. Assume that pizza parlors and burger joints are entirely separate entities-that is, there aren't places that serve both pizzas and hamburgers. 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. Supply Demand Supply Demand QUANTITY (Pizzas) PRICE (Dollars per pizza) 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 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. If the price decrease was small, 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. PRICE (Dollars per pizza)
Chapter4: Utility Maximization And Choice
Section: Chapter Questions
Problem 4.2P
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