Suppose the price of cheese rises. In the market for pizza, one would expect that
A)the supply of pizza would increase, and the price would fall.
B)the demand for pizza would increase, and the price would increase.
C)the demand for pizza would decrease, and price would fall.
D)the supply of pizza would decrease, and price would rise.

Question

Quizplus · Accepted Answer

Cheese is an input for making pizza. If the price of cheese rises, it will increase the cost of making pizza. Thus, pizza producers will reduce the supply of pizza, which will drive up the price of pizza. Therefore, the supply of pizza would decrease, and the price would rise.

Suppose the Price of Cheese Rises