Concept explainers
Subpart (a):
Graph the
Subpart (a):
Explanation of Solution
The calculation of quantity demanded (
Substitute the values in equation (1) to calculate the quantity demanded at price $5.
Quantity demanded is 200.
The calculation of quantity supplied (
Substitute the values in equation (1) to calculate the quantity supplied at price $0.5.
The quantity supplied is 0.
By using the same Equation (1) and (2), the supply demand schedule is shown in Table 1.
Table 1
Price | Quantity demanded | Quantity supplied |
$5 | 200 | 0 |
$10 | 100 | 100 |
$15 | 0 | 200 |
On the basis of the above demand schedule, the supply and demand curve of pizza is shown below.
Figure 1 shows equilibrium price and quantity of pizza.
In Figure 1, the vertical axis measures the price of pizza and horizontal axis measures the quantity demanded of pizza. The downward sloping curve is the demand curve and upward sloping curve is the supply curve of pizza. The intersecting point of the demand and supply curve is the equilibrium point and the corresponding price and quantity is the equilibrium price and equilibrium quantity of pizza. Thus, $10 is the equilibrium price and 100 is the equilibrium quantity of pizza.
Concept introduction:
Equilibrium point: Intersecting point of
Subpart (b):
Calculation of quantity of pizza.
Subpart (b):
Explanation of Solution
The given information:
Calculation:
The calculation of quantity of pizza is shown below:
Substitute the values of price as $10 either the demand or supply equation.
The quantity demanded of pizza is 100 at price $10.
Concept introduction:
Demand: Consumer's desire and willingness to pay a price for a specific good or service which satisfies his wants.
Subpart (c):
Effect of change in price of pizza on its supply.
Subpart (c):
Explanation of Solution
If the suppliers set the price of pizza at $15, the producer would want to produce 200 pizzas
Subpart (d):
Equation for new market demand.
Subpart (d):
Explanation of Solution
When the price of hamburgers (substitute for pizza) doubles, the quantity demanded of pizza will change. Thus, the equation for new market demand for pizza is shown below:
Subpart (e):
Calculation of equilibrium price and quantity.
Subpart (e):
Explanation of Solution
The given information:
Calculation:
The calculation of equilibrium quantity (
The equilibrium price is $11.67.
Substitute the values of price either demand od supply equation to calculate the equilibrium quantity as follows:
The equilibrium quantity is 133.
Concept introduction:
Equilibrium point: Intersecting point of demand and supply is known as equilibrium point and corresponding price and quantity is the equilibrium price and equilibrium quantity.
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Chapter 3 Solutions
Principles Of Microeconomics
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