In: Economics
Consider Phil who is a utility maximizing consumer with preferences between pizza and burgers, both normal goods. Phil currently consumes 5 slices of pizza a week at a price of $2.50 a slice. Suppose the price of pizza were to increase to $3.00 a slice, causing Phil’s consumption to fall to 3 slices. Keith Yacucha Econ 103 Fall 2020
Graph Phil’s personal demand curve for pizza, demonstrate how this change in price causes Phil to change his consumption, be sure to fully label and show both income and substitution effects.
Presume that, including Phil, there are 1000 identical consumers in the immediate market for pizza. Graph the market demand for pizza, be sure to fully label the diagram and compute the total quantity of pizza demanded at $2.50 and $3.00.