Question 1Suppose the market demand for pizza is given by Qd = 300 - 20P and the market supply for pizza given by Qs = 20P – 100 Graph the supply and demand for pizza using $5 through $15 as the value of P. In equilibrium, how many pizzas would be sold, and at what price?What would happen if suppliers set the price of pizza at $15? Explain the market adjustment process. Suppose the price of hamburgers, a substitute for pizza, doubles. This leads to a doubling of the demand for pizza (at each price consumers demand twice as much pizza as before). Write the equation of the new market demand for pizza. Find the new equilibrium price and quantity for pizza. If the price of Pizza is $2 what is the elasticity of demand and supply for pizza? Now if the price increases to $5 calculate the demand and supply elasticities.

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Answered: Question 1 Suppose the market demand…

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter4: Supply And Demand: An Initial Look

Section: Chapter Questions

Problem 2TY

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Question 1

Suppose the market demand for pizza is given by Qd = 300 - 20P and the market supply for pizza given by Qs = 20P – 100

Graph the supply and demand for pizza using $5 through $15 as the value of P.
In equilibrium, how many pizzas would be sold, and at what price?
What would happen if suppliers set the price of pizza at $15? Explain the market adjustment process.
Suppose the price of hamburgers, a substitute for pizza, doubles. This leads to a doubling of the demand for pizza (at each price consumers demand twice as much pizza as before). Write the equation of the new market demand for pizza.
Find the new equilibrium price and quantity for pizza.
If the price of Pizza is $2 what is the elasticity of demand and supply for pizza? Now if the price increases to $5 calculate the demand and supply elasticities.

Definition Video Definition Point where the demand and supply curves intersect. At the equilibrium price the quantity supplied of a good is equal to the quantity demanded. When the market is not in equilibrium, market surplus or market shortage occurs. The region that is above the price equilibrium indicates market surplus and the region below the price equilibrium indicates market shortage. Video

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