ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -If the price goes up, the quantity demanded goes down (but demand itself stays the same). If the price decreases, quantity demanded increases. This is the Law of Demand. On a graph, an inverse relationship is represented by a downward sloping line from left to right.

Detailed explanation-2: -If there is more demand than supply, there will be a shortage in the market and the price will rise. If there is more supply than demand, there will be a surplus in the market and the price will fall.

Detailed explanation-3: -As a result, these products’ prices and quantity from the initial equilibrium condition increases. Thus, the given situation concludes that the equilibrium price and quantity of inferior goods, such as macaroni and cheese, tend to increase when their consumers’ income drops.

Detailed explanation-4: -The increase in the price of cheese will cause an increase in the quantity of cheese supplied, which can be shown by a movement along the supply curve for cheese. Since an increase in the price of cheese will raise the cost of producing pizza, the supply of pizza will decrease.