Extra Credit

Assignment 2

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Supply and Demand II

Review the discussion and graphical analysis of the pizza and cheese sticks example in unit one, reading assignment number two. Suppose the two products are treated as substitutes instead of complements. Create two supply and demand graphs, one showing the effect on equilibrium price and quantity for cheese sticks when pizza goes up in price and the other showing the effect on equilibrium price and quantity for cheese sticks when pizza goes down in price. In each case, make one shift of either the supply or demand curve. In addition, briefly explain (about 100 words) whether you believe the two products are complements or substitutes.