The following are the various demand and supply schedules for pizza. Let's start by assuming that the demand and supply on the pizza market are D2 and S2.
(a) What is the equilibrium price and quantity of pizza?
(b) Now suppose people's tastes switch to pizza. What happens to equilibrium price and quantity?
(c) Let's add another change to the market. This time let's assume that, although with that change in taste, the price of pizza ingredients (cheese, onions, and so on) falls. What happens to equilibrium price and quantity?
(d) Finally, let's suppose that a new health report reveals that pizza is bad for your health and people's demand for pizza falls dramatically, even below the original Do schedule. What happens to equilibrium price and quantity? The table below shows three demand and three supply schedules. Starting with D3 and S3, explain what happens to the price of a pizza slice when
(a) demand changes to D2 and supply to S2.
(b) What happens when supply reverts to S3 but demand remains at D2? And
(c) when demand falls to D1?