Question

someone please help im trying to understand this but i need help with the graph and explain the changes

Chpt. 4: Market Forces of Supply and Demand-Set B 1. Assume we are analyzing the market for Papa John's medium-sized pizzas. a) Using the axes below please draw and label the demand (dd) and supply (5) curves. [2 pts) Price Papa Johns Medium Pizzas b. Identify the equilibrium price ($10) and quantity (2,000) (1 pt.) Now alter the model (above) to reflect the fact that 1) Domino's Pizza reduced their price for a medium pizza from $9.50 to $8.75, 2) the cost of pizza ingredients (e.g., cheese, sauce and dough) dropped by 15 percent and 3) Papa John's stores purchased new convection ovens which increase productivity. The outcome of these changes result in a $9.00 market price for a Papa John's medium pizza and the quantity sold is 2,100. [4 pts.) Explain why you made the changes to the model which you did. (4 pts. ]

Answer 1

Answer-

Price ss1 ss2 dd1 dd2 2000 2100 Papa John's pizza

Original Equilibrium: Price= $10 & Quantity= 2000

New Equilibrium: Price=$9 & Quantity=2100

Since price falls and Quantity rises.

It means fall in demand is less than rise in supply.

d. 1) Domino's pizza reduced their prices, so demand for Papa John's pizza falls. As Domino's and Papa John's pizza are substitutes. So, Demand curve shifts left or down.

2) The cost of pizza ingredients dropped, so it is cheaper to produce pizza now. So, the supply curve shifts right or down.

3) New convection ovens increases productivity and supply of pizza. So, the supply curve shifts right or down.

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