# Economics

Price
(dollars per pizza) Quantity demanded
(pizzas per week) Quantity supplied
(pizzas per week)
5 750   300
6 700   400
7 650   500
8 600   600
9 550   700
10 500   800
11 450   900
12 400 1,000
A market research team has come up with the demand and supply schedules for pizza in Cheeseboro. These schedules are given in the table above. Use these data to analyze the situation in the market for pizza.

a) Draw a figure showing the demand curve for pizza and the supply curve of pizza. What are the equilibrium price and quantity?

Ans: As shown in the graph, the equilibrium price is 8 dollars per pizza
and the quantity is 600 pizzas per week.

b) Suppose the price is \$10. Describe the situation in the market and explain how the price of pizza adjusts. Now suppose the price is \$6. Describe the situation in the market and explain how the price of pizza adjusts.

Ans : Suppose the price   is \$10, the quantity supplied exceed the
quantity demanded, there is a surplus of pizzas. The price will fall
to \$8 to achieve market equilibrium. Then the price is \$6,the quantity                                                             demand exceed the quantity supplied, there is a shortage of pizza. So, the                                                     price have to raise to \$8 to achieve market equilibrium.

c) The market research report also includes a prediction about the effect on the market for pizza in Cheeseboro of a recent news published in Cheeseboro Herald. The Herald reported that pizza has been discovered to help prevent heart diseases. Unfortunately, your dog chewed up the report and all you can read about the prediction is "quantity... by 150 at each price." What does the prediction say? Use your graph to show the predicted effects on the market for pizza. What are the predicted equilibrium price and quantity? How will the market adjust?
Ans :   After the report show that pizza can help...