Suppose new technological developments in how pizza is cooked reduced the cost of producing a slice of pizza.?

Question

What would this mean to both consumers and producers in relationship to the price of pizza and the amount of pizza supplied? Explain.

Answer 1

The vast majority of consumers would be totally clueless to this technology because it doesn't factor into their lives.  Producers would take hold of the new technology and use it to increase profits.  The increase in profits would help the company in leaner times, or as in such economic changes like today, keep the company in a profitable situation with rising prices.  

Would you see the price of pizza drop?  Maybe, but not because the producers are looking out for the consumer's pocketbooks.  Price drops by producers would clearly be motivated by competition attempting to get a larger majority of the consumers.  

The amount of pizza supplied?  Marginally.  It would only increase if the demand increased.  They aren't going to produce more if there isn't the demand to eat more.  If they produce more, and no one eats it, it will just go to waste and "eat up" the profits generated by the new technology.

Answer 2

Those investing in the new technology have a pricing advantage over the competition - either they stay at the same price and increase profits, or they can cut prices and maintain profit margins, and possibly increase volume.

Lower prices might lead to more pizza being consumed, but may simply move purchases from the high priced, to the lower priced vendor.

Reducing prices can also have contradictory effects. A Hermes scarf will run $400 or more - the exorbitant price is part of what makes people purchase it, as an exclusive item. People also judge cheap food as being of lower quality, and you may loose potential customers.

Answer 3

America will get fatter?