Marie Sheryl Fernandez

Abigail Abay
Rodolfo Lagura

1. Graph the demand and supply curves. Make an informed analysis based on the graph
that you have regarding the lines and intersection points that can be found in your graph.

DEM A N D & SUPPLY FOR PIZZA

10

7
prices of pizza (per pieces)

E
6 (P=6, Q=81)

0
0 1 2 3 4 5 6 7 8

QUANTITY of pizza (per pieces)

Demand Supply

The graph above is a demand and supply model for pizza. As you can see the supply curve (S) is upward
sloping and the demand curve (d) is downward sloping and both curves have intersected, thus creating an
equilibrium point (E). At point E, the values are 6 as the equilibrium price and 81 as the equilibrium quantity.
The equilibrium point represents that both the quantity demanded and quantity supplied are equal at a
particular price. This means that the suppliers have produced enough supplies at their desired selling price
equal to the quantity demanded by the customers at a price they are willing to pay for. But, equilibrium in the
market rarely happens because most of the time demand is greater than supply and vice versa. The curly
brackets in the graph represents the shortage and surplus of the demand and supply for pizza. There is surplus
when the quantity supplied exceeds to the quantity demanded while shortage happens if the quantity
demanded exceeds to the quantity supplied at a particular price. In the given data, there was surplus when the
price were 7 (QD=68 < QS=98), 8 (QD=53 < QS=110) and 9 (QD=39 < QS=121) while the shortage took place
when the price were 4 (QD=135 > QS=26) and 5 (QD=104 > QS=53).
 2. What will happen to your graph if the tastes of the buyers shifted to eating burgers
instead of pizza? Show your analysis by making a graph.

DEM A N D & SUPPLY FOR PIZZA

10

7
prices of pizza (per pieces)

0
0 1 2 3 4 5 6 7 8

QUANTITY of pizza (per pieces)

Demand Supply
Demand1

You'll notice in this demand and supply model—above— that the demand curve has shifted from the
original demand curve (D0) to the new demand curve (D1). There has been a shift because there was also a
change in the tastes of the buyers from pizza to burgers. Due to this, the demand curve has decreased, thus
shifting to the left would best represent it. A shift to the left would mean that the quantity demanded has
decreased at the same given price. It is also visible that only demand curve has shifted because “tastes and
preferences” is one of the non-price determinants of demand. Regarding the values associated in the graph,
we just assumed it that way since there are no given numbers in this case. On the other hand, the shift would
also mean a new equilibrium (E1) has occurred. This new equilibrium point has lower equilibrium quantity
demanded and equilibrium price compared to the original one. Overall, the change of the tastes of the buyers
from pizza to burgers would shift the demand curve to the left signifying a decrease in quantity demanded.

3. What will happen to your analysis in (a) if the government imposed heavy taxes on the
sales of pizza, what will be the impact to the market? Justify your answer using
economic concepts.
If the government imposed heavy taxes on the sales of pizza, then the suppliers would
have no choice but to increase the price of the pizza as well since taxes will be added to the
production cost. An increase in production cost would make suppliers to produce less because
it is now more costly to produced one pizza. Due to this a shift of the supply curve will occur
representing a decrease in supply. On the perspective of the buyers, the demand for pizza will
also decrease since there has been an increase of the price as what the law of demand says.
It will also show a movement in the demand curve but not a shift since only the price has been
changed.