Ernesto's Pizza is about to offer customers a new variety of a personal pizza. Which of the following actions by Ernesto's Pizza would most likely prevent a surplus or a shortage of the personal pizzas in its first week?
A) Limit the supply of the personal pizza
B) Lower demand for the personal pizza
C) Set the price of substitute goods
D) Estimate the market price of the personal pizza
E) Lower the price of the pizza throughout the week

Question

Quizplus · Accepted Answer

To prevent a surplus or a shortage, it is important to estimate the market price of the new product, which will help determine the optimal price and quantity to supply to meet demand. This can help ensure that Ernesto's Pizza neither overproduces nor underproduces the new personal pizza variety. Limiting supply (A) or lowering demand (B) may not result in the most efficient allocation of resources, while setting the price of substitute goods (C) may be less relevant for a new product. Lowering the price throughout the week (E) may lead to a temporary increase in demand, but may not help prevent surpluses or shortages in the long run.

Ernesto's Pizza Is About to Offer Customers a New Variety