88PART TWOSUPPLY AND DEMAND I: HOW MARKETS WORKQUICK QUIZ:Analyze what happens to the market for pizza if the price oftomatoes rises.◆Analyze what happens to the market for pizza if the price of hamburgers falls.CONCLUSION: HOW PRICES ALLOCATE RESOURCESThis chapter has analyzed supply and demand in a single market. Although ourdiscussion has centered around the market for ice cream, the lessons learned hereapply in most other markets as well. Whenever you go to a store to buy something,you are contributing to the demand for that item. Whenever you look for a job,you are contributing to the supply of labor services. Because supply and demandare such pervasive economic phenomena, the model of supply and demand is apowerful tool for analysis. We will be using this model repeatedly in the followingchapters.One of the Ten Principles of Economicsdiscussed in Chapter 1 is that markets areusually a good way to organize economic activity. Although it is still too early to
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