httpwwwbloombergcomnewsarticles20160106chipotlesayssalesdrop

http://www.bloomberg.com/news/articles/2016-01-06/chipotle-says-sales-dropped-even-more-than-expected-last-quarter

accepted/graded. Answer each questions neatly and thoroughly and show your work. If you prefer, you may submit your homework answers physically in the drop box outside my office door (2280 SSB) before noon on Friday Jan 29. Use the supply-and-demand model to explain verbally and illustrate graphically why sales at the restaurant chain Chipotle have fallen lately. (3) 1.

Solution

In the returant chain of Chipotli, Sales has dropped sigificatly. It is expected that sales of last quarter will drop by more than 30%. It is due to some food bourne illness which has made many people sick. Now customers are avoiding the food of the chain due to this fear. As a result demand has dropped. The curve has shifted to the left. It is shown below:

In the diagram above, original demand curve is blue curve 1. It has intersected with orange supply curve, at point e2. So Q2 is the equilibrium price. ow after food disease, demad curve has shifted to left at blue curve 2. So new equilibrium is point e1. Hence demand has dropped to Q1