In a simple model of the supply and demand for pizza, when the price of cheese increases, the price of pizza ______ and the quantity purchased ______.
A) increases; increases
B) decreases; increases
C) decreases; decreases
D) increases; decreases

Question

Quizplus · Accepted Answer

The increase in the price of cheese, a key ingredient in making pizza, will increase the cost of producing pizza. As a result, the supply of pizza will decrease as some producers may choose to exit the market or reduce their production. With a decrease in supply and all other factors constant, the price of pizza will increase. However, the increased price will lead to a decrease in the quantity of pizza demanded, as consumers may choose to purchase substitutes or reduce their overall consumption of pizza. Thus, the quantity purchased will decrease.

In a Simple Model of the Supply and Demand for Pizza