Chapter 2R, Problem 9MCQ

To determine

The question requires us to identify the events which cause both the price and quantity of pizza to increase.

Explanation of Solution

The options:

1. An increase in the price of mozzarella cheese will increase the input cost of producing pizza and thus causes the supply of pizza to fall.
2. A publication on health will reduce the demand for pizza as people will avoid eating pizza to stay healthy.
3. An increase in the price of a pizza oven will increase the input cost of producing pizza and thus causes the supply of pizza to fall.
4. If consumers expect the price of a pizza to fall next week they will hold their cash for a while and demand more in the next week. This week the demand will stay low.
5. If consumers’ income decreases and pizza is an inferior good then demand for pizza will increase.

As a result of lower income, the demand for pizza will increase and shift the demand curve rightward and causing the price and quantity both to rise.

Thus option “e” is correct.

Economics Concept Introduction

1. If the income falls, then the demand for inferior goods will rise.
2. If the demand for goods and services increases, then both the price and quantity of a product will increase.