Suppose the price of pepperoni falls. In the market for pizza, in which pepperoni of a popular ingredient, 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

If the price of pepperoni falls, the cost to produce pepperoni pizza will decrease. This will incentivize pizza shops to increase the supply of pizza, as they can now produce it at a lower cost. With more pizza available in the market, the price will fall as pizza shops compete to sell their product. Therefore, one would expect that the supply of pizza would increase, and the price would fall.

Suppose the Price of Pepperoni Falls