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The market prices for pizzas in the college town increased recently, and students in economics class are debating the causes of price increase

Economics

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The market prices for pizzas in the college town increased recently, and students in economics class are debating the causes of price increase. some students suggest that the price increase because several pizza parlors in the area have recently gone out the business. Other students attribute the increase in price of pizzas to a recent increase in college student enrollment.

The first group of students thinks the increase in the price of pizzas is due to the fact that several pizza parlors in the area have recently gone out the business.

1. On the following graph, adjust the demand and supply curves to illustrate the first group?s explanation to increase in the price of pizzas.

The second group attributes the increase in price of pizzas to a recent increase in college student enrollment.

2. On the following graph, adjust the demand and supply curves to illustrate the second group?s explanation to increase in the price of pizzas.

3. Suppose that both of events you analyzed above are partly responsible for the increase in the price of pizzas. Based on your analysis of explanations offered by two groups of students, how will you figure about which of the possible causes was dominant cause for increase in the prices of pizzas?

a) Which change occurred first must have been the primary cause for increase in the price of pizzas.

b) If the equilibrium quantity of pizza increases, then the demand shift in the market of pizzas must have been larger than the supply shift.

c) If the increase in the price was larger, then the supply shift in the market of pizzas must have been larger than the demand shift.

d) If the equilibrium quantity of pizzas increases, then the supply shift in the market of pizzas must have been larger than the demand shift.