Question

14 10 40 60 70 140 Q 2) The above figure shows a graph of the market for pizzas in a large town. Suppose that concem over dietary habits has led the government to impose a restriction that limits suppliers to produce no more than 40 pizzas. What will the price of pizza be as a result of this quota? (5pts) A) $2 B) $7 D) $10

Answer 1

2) D) $ 10

Quota of 40 pizzas means supply of pizza is vertical at 40 units. New equilibrium price is where demand and supply curve intersects. New equilibrium price is $ 10.

3) Slope = dQ^D/dP = - 2

Slope of demand function is - 2. It shows demand curve is negatively sloped i.e. increase in price decreases demand of good and vice-versa.