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Price Per D Pizza Sekar Quantity of pizzas per week 4. Consider the Rochester-area retail market for pizza delivery (large, two-topping pizza). The a. Suppose the market price of a delivered pizza was initially $10. Would this market b. Now suppose this market is in equilibrium. Label the equilibrium price P1 and the market supply and market demand curves are represented on the graph above. be in equi riencing a surplus ge? Explain. equilibrium qu Event: Chinese restaurants in the area establish a partnership with Grubhub, a food delivery service that allows you to order takeout meals from partnering food establishments that will be delivered by Grubhub drivers. To promote their new arrangement, area Chinese restaurants cut their prices on all orders delivered by Grubhub by 40% for a month-long promotion. How would the demand and/or supply curves of pizza delivery by affected by this event? Explain and show graphically equilibrium price and the equilibrium quantity of pizzas delivered in the Rochester area while the month-long promotion is in place? Explain.
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a. A market is in equilibrium where the quantity demanded is equal to quantity supplied(Qd Qs). The market is in equilibrium at price S9. Here the quantity demanded is 10,000 and quantity supply is also 10,000 At a price of pizza at $10 the market is not in equilibrium. Because at this price the supply exceeds demand which is equal to 5000. (the gap between the demand curve and supply curve is the excess supply. There is a surplus of supply over demand which is equal to 5000 urplus Price per Pizza 1 P, 9 Qi 5,000 10,000 15,000 The equilibrium price is 9 or P and equilibrium quanity is 10,000 or Ql The price cut of 40% by the Chinese restaurant on the Pizza will increase the demand for Pizza. This will change the equilibrium condition of the market of Pizza in the area. The fal in price stimulates more demand (more wil be demanded at lower price). Then the price of Pizza moves upward to a higher which may be above the equilibrium price. This increase in price increase the supply o Pizza and thus the price come back to the old equilibrium position Finally the former equilibrium will be restored by the movement of demand and supply Surplus 1 P, 9 Price per Pizza Qi 5,000 10,000 5,000 At a price below the equilibrium price ) the demand exceeds supply. If the supply also increases with the increase in demand more quantity will be traded at the same price (equilibrium quantity increase). If the supply does not increase inproportion with the increase in demand the quantity will not increase but the price goes up to the former position. The increase in demand over supply pushes up the price to the equilibrium price. Note: The supply and demand curve does not shift with the change in price. The seller or buyer moves along the supply curve and demand curve

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