Please write your answers for each of the following questions. 1. Bob\'s Burgers
ID: 1144659 • Letter: P
Question
Please write your answers for each of the following questions. 1. Bob's Burgers charged $3.50 for a quarter-pound hamburger with all the fixin's, and sold 7,500 of them. The following year, although Bob raised the price to $3.75, sales of his burgers rose to 8,200. Use the concepts of a shift in the demand curve versus a movement along the demand curve to explain why this increase in sales does not represent a violation of the law of demand. 2. Stuffed-Crust Pizza is a new pizza introduced by Pizza Hut. What happens to the equilibrium price and equilibrium quantity of Stuffed- Crust Pizza in each of the following situations? a. Due to weather conditions, the output of wheat decreased and the price of wheat flour increased. b. The price of beer decreased. c. Domino's Pizza introduced a similar pizza that sold for $1 lss than the one sold by Pizza Hut. d. A recession reduced households' income. e. A new oven technology reduced the time it takes to bake a pizza.Explanation / Answer
Q1) This increase in sales represent a rightward shift in the demand curve. There may be various reasons due for this which donot violate the law of demand like change in consumer preferences in favour of Bob's burgers or a larger increase in the price of substitutes of Bob's burgers.
Q2) a) There wil be an increase in the equilibrium price and fall in the equilibrium quantity because the supply curve is shifted to the left due to increase in the cost of input.
b) Fall in the price of Beer (being a complement of pizza) will result in rightward shift or increasing shift in the demand curve of pizza resulting in increase of eq. price and quantity as well.
c) Reduced price of substitute results in decrease in demand for every price level i.e. a leftward shift of demand of pizza hut pizzas resulting in decrease in eq. quantity and price as well.
d) A fall in household income will reduce demand of pizzas at every price level resulting in shift of demand curve to the left and fall in eq. price and quantity.
e) A technological improvement reducing the cost results in the increase in supply of pizza at every price i.e. a shift in supply curve to the right resulting in fall in eq. price and increase in eq. quantity.
NOTE: price is taken on the y-axis and quantity on the x-axis.