Explain this graph:

arium in the Pizza Market Market Equilibrium (cont.) (a) Market schedules Millions of Pizzas per Week Price per Quantity Quantity Surplus or Effect on Pizza Demanded Supplied Shortage Price $15 28 Surplus of 20 Falls The equilibrium price is $9 per pizza, and the 24 Surplus of 10 Falls 20 Equilibrium Remains the same 16 Shortage of 10 Rises 12 Shortage of 20 Rises equilibrium quantity is 20 million per week.At that (b) Market curves price and quantity, the market clears. Because there is S $15 no shortage or surplus, there is no pressure for the 12 Price per pizza price to change. The demand and supply curves from 9 . . . . 6 an x at the intersection. The equilibrium found where 3 D 14 16 "x" marks spot. 20 24 26 Millions of pizzas per weekShifts of the Demand Curve In Exhibit 6, demand curve D and supply curve 5 intersect at point C to yield the initial equilibrium price at $9 initial equilibrium quantity of 20 million 12-inch regular pizzas per week. Now suppose that one of the determinants of demand changes in a way that increases demand,shifting the demand curve to the right from D to D.Any of the following could shift the demand for pizza rightward: EXHIBIT 7 Shift of the Supply Curve Effects of an Increase in Supply Let's consider shifts of the supply curve. In Exhibit 7, as before,we begin with demand curve D and supply curve S Price per pizza intersecting at point C yield an equilibrium price at $9 and an $9 C. equilibrium quantity of 20 million pizzas per week. 6 + After the supply curve shifts rightward in Exhibit 7, the 20 26 30 amount supplied at the initial price of $9 increases fro 20 Millions of pizzas per week million to 30 million, so producers now supply qo million . ... . .. . . . ..... . . . . . more pizzas than consumers demand. This surplus forces . . . . . . the price down.Simultaneous Shifts of Demand and Supply Curve As long as only as one curve shift, we can say for sure how equilibrium price and quantity will changle both curves shift_,however, the outcome is less obvious. For example, suppose both demand and supply increase, or shift rightward, as an Exhibit 8. m \"MIHWHHHHH Simultaneous Shifts of Demand and Supply Curve (cont.) These results are ni doubt confusing, but Exhibit 9 EXHIBIT 9 Effects of Shifts of Both Demand and Supply summarizes the four possible combinations of changes. Change in demand Demand increases Demand decreases Using Exhibit gas a reference, please take the time tight Equilibrium Equilibrium now to work through some changes in demand and price change price falls. Supply is indeterminate. increases Equilibrium supply to develop a feel for the results. Equilibrium quantity change quantity increases is indeterminate. Change in supply Equilibrium Equilibrium price price rises. change is indeterminate. Supply decreases Equilibrium Equilibrium quantity change quantity decreases. is indeterminate.Price Floors Sometimes public officials set prices above their equilibrile levels. For example, the fedeaI governemnt regulates some agriculture prices in an attempt to ensure farmers a higher and more stable income than the}.r would otherwise earn. To achieve higher prices, the federal government sets a price oor or a minnimu selling price that is above the equilibrium price. Exhibit 11a shows the effect of a $2.50 per gallon price I- _ . _ n T9 2' Millions of gallons per month floor of milk. At that price farmers supply 24 million gallons per week_,but consumer demand only.r 14 million gallons,yieiding a surplus of 10 million gallons. Price Ceiling Sometimes, the public officials try to keep a price below the equilibrium level by setting a price ceiling,or maximum ceiling price. Concern about the rising cost of rental housingr in some cities has promted city official to impose rent ceilings. Exhibut11b,depicts the demand and supply of rental housing. The vertical axis shows monthly rent, and the horizontal axis shows the quantity of rental units. The equilibrium or market clearing,rent is $1,000 per month, and the equilibrium quantity is 50,000 housing units. . 40 50 60 Thousands of rental unit: per munl