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Suppose the market demand for pizza is Qd = 300-20P and the market supply of pizza is Qs= -100 + 20 P where P= price (per pizza)

a. At equilibrium how many pizzas will be bought and sold? What is the equilibrium price? Calculate elasticity of demand and supply at equilibrium

b. What would happen if the sellers set the price at $15 per pizza? Calculate price elasticity of demand and supply at this point.

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Samantha Balando
Samantha BalandoLv7
28 Sep 2019

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Related questions

There are four buyers (Debu, Sumon, Aslam & Rakib) in the market. All of them want to buy a pizza. Debu is willing to pay 800/- taka for one pizza, Sumon is willing to pay 600/- taka for one pizza, Aslam is willing to pay 400/- taka for one pizza, and Rakib is willing to pay 200/- taka for one pizza. On the other hand, there are four pizza sellers in the market (Anup, Roni, Himel & Badal). Anup’s cost of producing one pizza is 200/- taka, Roni’s cost of producing one pizza is 400/- taka, Himel’s cost of producing one pizza is 600/- taka, and Badal’s cost of producing one pizza is 800/- taka. Based on all of this information, answer the following questions

Q1 Derive the demand schedule for pizza.

Q2 If the market price of one pizza is 450/- taka, what will be the market quantity demanded pizzas, and what will be the total consumer surplus?

Q3 If the market price of one pizza is 350/- taka, what will be the market quantity demanded pizzas, and what will be the total consumer surplus?

Q4 Derive the supply schedule for pizza.

Q5 If the market price of one pizza is 500/- taka, what will be the market quantity supplied for pizzas, and what will be the total producer surplus?

Q6 If the market price of one pizza is 900/- taka, what will be the market quantity supplied for pizzas, and what will be the total producer surplus?

Q7 Now, considering the demand and supply side of this pizza market, calculate the market quantity demanded and quantity supplied at 100/-, 300/- and 500/- taka. Which of these prices brings supply and demand into equilibrium?

Q8 What are the entire consumer surplus & producer surplus, and total surplus in this equilibrium?

1. You own a pizza shop and you use both labor and capital to make your pizzas. Currently the marginal product of labor is 5 pizzas per hour, while the marginal product of you capital is 2 pizzas per hour. You pay your labour $10 per hour, and your capital costs you $5 per hour. The price of pizza is $2.50. Is you little shop using its inputs efficiently? Explain.

2. What is the difference between a profit and a rent? If a firm is interested in maximizing profits, why would it stay in an industry if profits are zero?

3. The “Vintage Sisters” collect old junk, fix it up, and sell it at craft fairs as a hobby. All of their costs are covered by their poor father who lets them use his shop, tools, and paint for free. When pricing their stuff, what elasticity of demand should they aim for? Why?

4. Solve for the equilibrium price and quantity (P* and Q*) both algebraically and graphically (using graph paper), for these four markets:

Market 1:

QD = 10 – P

QS = 5

Market 2:

QD = 10 – P

QS = 5 + P

Market 3:

QD = 10 – ½ P

QS = 5 + 2 P

Market 4:

P = 10 – 2QD

QS = 1 + P

Suppose the market demand curve for pizza can be expressed as QD = 100 - 2P + 3Pb, where QD is the quantity of pizza demanded, P is the price of pizza, and Pb is the price of a burrito. What is the relationship between burritos and pizza, from the point of view of consumers?

a. They are independent.

b. They are substitutes.

c. Not enough information to answer the question.

d. They are complements.

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