# 15. Another supply and demand puzzle The market price of pizzas in a college town decreased…

15. Another supply and demand puzzle The market price of pizzas in a college town decreased recently, and the students in an economics class are debating the cause of the price decrease. Some students suggest that the price decreased because the price of dough, an important ingredient for making pizzas, has decreased. Other students attribute the decrease in the price of pizzas to a recent decrease in college student enrollment. The first group of students thinks the decrease in the price of pizzas is due to the fact that the price of dough, an important ingredient for making pizzas, has decreased. On the following graph, adjust the supply and demand curves to illustrate the first group’s explanation for the decrease in the price of pizzas. Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther. Supply Demand Supply PRICE (Dollars per pizza) Demand QUANTITY (Pizzas) The second group of students attributes the decrease in the price of pizzas to the decrease in college student enrollment. On the following graph, adjust the supply and demand curves to illustrate the second group’s explanation for the decrease in the price of pizzas. Supply Demand Supply PRICE (Dollars per pizza) Demand QUANTITY (Pizzas) Suppose that both of the events you have just analyzed are partly responsible for the decrease in the price of pizzas. Based on your analysis of the explanations offered by the two groups of students, how would you figure out which of the possible causes was the dominant cause of the decrease in the price of pizzas? If the equilibrium quantity of pizzas decreases, then the demand shift in the market for pizzas must have been larger than the supply shift. O If the price decrease was small, then the supply shift in the market for pizzas must have been larger than the demand shift. O If the equilibrium quantity of pizzas decreases, then the supply shift in the market for pizzas must have been larger than the demand shift. Whichever change occurred first must have been the primary cause of the change in the price of pizzas.