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Suppose the market demand for pizza is given by:
Qd = 300 - 20P
Qs = 20P - 100 where P = price (per pizza).
1. Suppose the price of hamburgers, a subsitute for pizza, doubles. This leads to a doubling of the demand for pizza. (At each price, consumers demand twice as much pizza as before.) Write the equation for the new market demand for pizza.

Respuesta :

Answer:

QD=600-40P

Explanation:

The old equation for the demand for pizza is Qd = 300 - 20P

Now because of an increase in the price of a substitute the demand for pizza doubles, in order to find the new equation will multiply the old equation by 2 because the demand has doubled.

300*2=600

20P*2=40P

New equation = 600-40P

We can check whether our new equation is correct or not.

If we assume the price of pizza to be 10 and then put 10 in both the equations the quantity from equation 2 should be double that of equation 1.

Equation 1= 300-(20*10)

=300-200=100

Equation 2 = 600-(40*10)

=600-400=200

AS we can see the quantity doubled on the same price which means our equation is correct.

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