Question

how do i break down the problems

This question examines the market for slices of pizza, You will construct a demand curve from a demand schedule and explore the relationship between the price of a slice of pizza, the price of a burrito (a substitute good), and the quantity of pizza slices demanded by consumers. The relationship between the price of a slice of pizza, the price of a burrito (a substitute good), and the quantity of pizza slices demanded is provided by the demand schedule below. Ouantity of Pizza Slice Ouantity of Piura Slices Price Demanded the prices Demanded in the prices 5.0 forritis 57 S12.00 10.00 8.00 6.00 4.00 Task 7: In the space below, in black ink, sketch out the demand curve for slices of pizza when the price of a burrito is $5.00. Remember to place “Quantity of Pizza Slices Demanded on the horizontal axis and “Price (dollars)" on the vertical axis. Hint: This demand curve is a straight line. Task 2: In the space above, in blue ink, sketch out the com accou010131201249bfdc52bc7202765552109368053 Dace to

Answer 1

There are two ways to sketch the demand curve for slices of pizza. The simplest way to do it to identify the co-ordinates of quantity demanded of pizza and price ($) as given in the demand schedule. The first column is the price ($) and second column is the quantity demanded of pizza when price of burrito = $5. Hence, you need to consider just the first two columns. As shown in the diagram below, identify the points (12,10), (10,20), (8,30), (6,40) and (4,50) and join all the coordinates to get the straight line demand curve.

Demand Curve for Pizza when price of burrito = $5 10, 12 20, 10 30,8 Price ($) 40,6 50,4 - 10 50 60 20 30 40 Quantity of pizza slices demanded

The second approach is little more technical in the sense that you can derive the equation and then draw the demand curve. Let us consider the equation of the demand curve in the form of a straight line; i.e., Y = a + bX, where 'Y' = price ($), 'X' = quantity demanded of pizza when price of burrito is $5 ,'a' is the intercept and 'b' is the slope of the demand curve. We need to first get the slope from the above data. To get the slope, consider any two pairs of price and quantity. Let us consider the pair (40,6) and (50,4). It says that when price falls from 6 to 4, quantity demanded increases from 40 to 50. That is change in price = 4-6 = -2 and change in demand = 50-40 = 10. Hence, the slope = change in price/change in demand, i.e., -2/10 = 0.2.

With the slope of -0.2, the demand equation can be written as Y = a - 0.2X. Now we know that at price 4, demand = 50. Using these figures of price and demand in the above equation, we get 4 = a - 0.2x50 => 4 = a - 10 => a = 14.

Hence, the demand equation becomes Y = 14 - 0.2X.

Now you can find out what would be the price when quantity demanded = 0 and the quantity demanded when price = 0, which will give you vertical intercept and horizontal intercept respectively.

Let us first see the case when quantity demanded = 0 => Y = 14-0.2x0 = 14, i.e., when quantity demanded = 0, price = 14. This gives us the vertical intercept.

Now when price = 0, the equation becomes 0 = 14-0.2X => 0.2X = 14 => X = 14/0.2 = 70. That is when price = 0, demand becomes 70, which is the horizontal intercept.

Now if you join the two points (0,14) and (70,0), this gives you the demand curve as shown below.

Demand Curve for Pizza when price of burrito = $5 0,14 Price ($) 70,0 70 0 10 80 20 30 40 50 60 Quantity of pizza slices demanded

This demand curve will pass through all the combinations of prices and demand given in the schedule above.