Question

Suppose the price of pepperoni falls. In the market for pizza, in which pepperoni of a popular ingredient, one would expect that

Answer 1

Answer:

Option (1) is correct.

Explanation:

The pepperoni is the ingredient of pizza and used as an input in the market of pizza. Hence, if there is a fall in the price of the pepperoni then as a result this will reduce the cost of production of pizza makers.

This would increase the supply of pizza and there is a fall in the price of pizza because of lower cost of production of pizza. There is a rightward shift in the supply curve of pizza.