Analyze what happens to the market for pizza, if the price of tomato rises and the price of hamburger falls.

1. #Analyze what happens to the market for pizza, if the price of tomato
rises and the price of hamburger falls.
Solve:
We know Tomatoes and Pizzas are compliments to each other and Hamburgers & Pizzas are
substitutes to each other.
In Figure – 01 our initial equilibrium was at E, when price was 200 and quantity demanded of
pizza was 100. Because of increasing tomatoes price, supply of pizza will be hampered and
pizzas price will be increased that’s why the supply curve shifts to the left and pizzas price
increased 200 to 250. Our new equilibrium is E’ where price is 250 and quantity demanded of
pizza is 80.
In Figure – 02 our initial equilibrium is E, when equilibrium price was 250 and quantity
demanded for pizza was 80. Because of falling price of hamburger, the demand curve for pizza
shift to the left because the lower price of hamburger will lead customers to buy more
hamburger and fewer pizzas. So, our new equilibrium is E’, where price is 200 and quantity
demanded for pizza is 60.
Figure 01
Figure 02