The market price of pizzas 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 pizzas 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 grain, which is not generally used in making pizzas. The first group of students thinks the increase in the price of pizzas 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 pizzas. (graph in photo) The second group of students attributes the increase in the price of pizzas 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 pizzas. (graph in photo) Suppose that both of the events you have just analyzed are partly responsible for the increase 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 increase in the price of pizzas? a. Whichever change occurred first must have been the primary cause of the change in the price of pizzas. b. If the equilibrium quantity of pizzas increases, then the supply shift in the market for pizzas must have been larger than the demand shift. c. If the price increase was small, then the supply shift in the market for pizzas must have been larger than the demand shift. d. If the equilibrium quantity of pizzas increases, then the demand shift in the market for pizzas must have been larger than the supply shift.

The market price of pizzas 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 pizzas 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 grain, which is not generally used in making pizzas. The first group of students thinks the increase in the price of pizzas 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 pizzas. (graph in photo) The second group of students attributes the increase in the price of pizzas 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 pizzas. (graph in photo) Suppose that both of the events you have just analyzed are partly responsible for the increase 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 increase in the price of pizzas? a. Whichever change occurred first must have been the primary cause of the change in the price of pizzas. b. If the equilibrium quantity of pizzas increases, then the supply shift in the market for pizzas must have been larger than the demand shift. c. If the price increase was small, then the supply shift in the market for pizzas must have been larger than the demand shift. d. If the equilibrium quantity of pizzas increases, then the demand shift in the market for pizzas must have been larger than the supply shift.

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

Everyone agrees that the decrease in the price of beer was caused by a recent decrease in the price of grain, which is not generally used in making pizzas.

The first group of students thinks the increase in the price of pizzas 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 pizzas.

(graph in photo)

The second group of students attributes the increase in the price of pizzas 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 pizzas.

(graph in photo)

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

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

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

c. If the price increase was small, then the supply shift in the market for pizzas must have been larger than the demand shift.

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

On the following graph, adjust the supply and demand curves to Illustrate the second group's explanation for the increase in the price of pizzas.
PRICE (Dollars per pizza)
QUANTITY (Pizzas)
Supply
Demand
Demand
--
Supply

On the following graph, adjust the supply and demand curves to illustrate the first group's explanation for the increase 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.
PRICE (Dollars per pizza)
QUANTITY (Pizzas)
Supply
Demand
Demand
Supply

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