Your friend Tony opened a pizzeria. You helped him to advertise his pizza, which is in fact the best pizza in town. As a result, the demand for Tony's pizza increases and your friend, noticing lines of customers, raises the price of his pizza
But then he fears that the higher price will cause demand to decline, which will cause the price to drop. Is Tony right in his analysis of the situation? Explain.
Tony is confusing a change in demand (a shift of the demand curve) with a change in quantity demanded (a movement along the demand curve). An increase in the price of his pizza cannot cause the demand for his pizza to decline, that is, it cannot shift the demand curve for his pizza leftward. The rise in the price results in a decrease in the quantity of pizza demanded. So Tony need not fear that the demand for his pizza will decrease as a result of a higher price.
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Refer to the scenario above. if the investor plans to invest a sum of $4,000, the net present value of Option C is:
A) -$1,236.36. B) -$337.56. C) $516.80. D) $1,800.79.
The ________ a corporation keeps to finance future expansion are known as retained earnings
A) dividends B) stock C) bonds D) profits
Refer to the diagrams, in which AD 1 and AS 1 are the "before" curves and AD 2 and AS 2 are the "after" curves. Other things equal, a decline in net exports caused by the foreign purchases effect of a price-level increase is depicted by the:
A. shift of the AD curve in panel (A).
B. move from point a to point b in panel (B).
C. shift of the AS curve in panel (B).
D. move from point a to point c in panel (C).
The average total cost curve eventually slopes upwards because of the
A) law of diminishing returns. B) reductions in average fixed costs. C) increase in capital costs. D) decrease in labor costs.