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 the price of dough, an important ingredient for making pizzas, has decreased. 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 the price of dough, an important ingredient for making pizzas, has decreased. 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. DemandSupplyPRICE (Dollars per pizza)QUANTITY (Pizzas)Demand Supply The second group of students attributes the decrease in the price of pizzas to the decrease in the price of hamburgers at local burger joints. 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. DemandSupplyPRICE (Dollars per pizza)QUANTITY (Pizzas)Demand Supply 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.

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 the price of dough, an important ingredient for making pizzas, has decreased. 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 the price of dough, an important ingredient for making pizzas, has decreased. 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. DemandSupplyPRICE (Dollars per pizza)QUANTITY (Pizzas)Demand Supply The second group of students attributes the decrease in the price of pizzas to the decrease in the price of hamburgers at local burger joints. 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. DemandSupplyPRICE (Dollars per pizza)QUANTITY (Pizzas)Demand Supply 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.

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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Another supply and demand puzzle

The first group of students thinks the decrease in the price of pizzas is due to the fact that the price of dough, an important ingredient for making pizzas, has decreased.

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.

DemandSupplyPRICE (Dollars per pizza)QUANTITY (Pizzas)Demand Supply

The second group of students attributes the decrease in the price of pizzas to the decrease in the price of hamburgers at local burger joints.

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.

DemandSupplyPRICE (Dollars per pizza)QUANTITY (Pizzas)Demand Supply

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.

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The curve that depicts various quantities of goods being demanded by individuals at different levels of price is known as the demand curve.

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