Answer to Question #116418 in Microeconomics for Mateus Michael Ndinomwene

Question

6.) Use a diagram to illustrate how each of the following events affects the equilibrium
price and quantity of Mexican pizza in Namibia.
a) The price of mushroom rises. Mushroom is the main in Mexican pizza.
b) The health hazards of hamburgers are widely publicised. Hamburgers are
substitute of pizza.
c) The price of tomato sauce falls. Tomato sauce is compliment to Mexican
pizza.
d) The incomes of consumers rise and Mexican pizza is an inferior good.
e) Consumers expect the price of Mexican pizza to fall next week.

Answer 1

6.) Use a diagram to illustrate how each of the following events affects the equilibrium

price and quantity of Mexican pizza in Namibia.  

a) The price of mushroom rises. Mushroom is the main in Mexican pizza.

Mushroom is an input. Thus, the supply of Mexican pizza will decrease.

b) The health hazards of hamburgers are widely publicised. Hamburgers are

substitute of pizza.

The consumers will prefer more pizza. Thus, its demand will increase.

c) The price of tomato sauce falls. Tomato sauce is compliment to Mexican

pizza.

For complement, an increase in the price of one reduces the demand for the other.

d) The incomes of consumers rise and Mexican pizza is an inferior good.

For inferior goods, an increase in income reduces the demand. Thus:

e) Consumers expect the price of Mexican pizza to fall next week.

Expectation of a decrease in price will reduce the current demand so that the consumers can purchase more with the same income later. Thus: