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BA 372 Lesson 2 Assignment 6

BA 372 Lesson 2 Assignment 6 - Ashley B Hilliard July 5...

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Ashley B. Hilliard 258-10-0169 July 5, 2010-October 22, 2010 BA 372 Lesson#2, Assignment 6 1. Beer and pizza are complements because they are often enjoyed together. When the price of beer rises, what happens to the supply, demand, quantity supplied, quantity demanded, and the price in the market for pizza? If the beer price increases because the demand for beer has increased, then demand for pizza would have also increased with consequent increase in pizza price. But if the price of beer has increased because of lower supplies at the previous price, higher beer price may lower demand of beer and since pizza and beer are often consumed together the demand for pizza may go down resulting in a fall in pizza prices. But there will be second round effects. All depend on the price elasticies of demand and supply of both beer and pizza as to where the next equilibrium will be. But generally speaking demand for pizza and beer will move in the same direction. Their prices may or may not always move in the same direction.
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