Question

4. In the below chart, sum the market supply and demand for tacos and burritos:

Price	Jack	August	Nala	Market Demand	Chipotle	Del Taco	Market Supply
$0	5	3	6		0	0
$1	4	2	5		2	1
$2	2	1	4		4	3
$3	1	0	2		6	5
$4	0	0	1		8	7

Use the above Market Demand and Supply Schedule to draw the supply and demand curves. Indicate the market equilibrium price and quantity. Draw the effect of an increase in the cost of tortillas (used in making both tacos and burritos). Describe if and how this changes equilibrium quantity and price.

Answer 1

Price	Jack	August	Nala	Market Demand	Chipotle	Del Taco	Market Supply
$0	5	3	6	14	0	0	0
$1	4	2	5	11	2	1	3
$2	2	1	4	7	4	3	7
$3	1	0	2	3	6	5	11
$4	0	0	1	1	8	7	15

Due to the increase in the cost of tortillas there will be less supply of tacos and burritos at a given price which means supply curve shifts to the right (becuase we have represented the price on the horizontal axis). Increase in the cost of tortillas does not affect the demand curve.

In equilibrium, Price increases and quantity decreases because of the downward sloping demand curve. The new equilibrium is represented by point A' in the above graph.