Question

In: Economics

What effect will each of the following have on the demand for hamburgers? (increase, decrease, or...

What effect will each of the following have on the demand for hamburgers? (increase, decrease, or no effect)

a. Hotdogs become more expensive (while the price of hamburgers stays the same). ___
___________
b. The price of hamburgers falls. ______________

c. Income declines and hamburgers are an inferior good. ______________

d. The price of French fries (which people eat with hamburgers) falls. ______________

2- What effect will each of the following have on the supply of fast food hamburgers?

a. The wages of fast food workers increases. ______________

b. A decrease in the price of ground beef. ______________

c The price of hamburgers increases. ______________

d The levying of an additional sales tax on all fast food. ______________

Expert Solution

a. If hotdogs become more expensive (while the price of hamburgers stay same) then the demand for hamburgers will increase.

Hamburger and hotdogs are substitutes to each other that imply a increase in the price of hotdog will increase the quantity demanded for the hamburger. Increase in the price of substitute (hotdogs) leads to an increase in the demand for the given commodity.

b. The price of hamburgers falls, the demand for hamburgers rises.

If price of given commodity falls, its quantity demanded increases. So the demand for for hamburgers will increase when its price fall.

c. When income declines and hamburgers are inferior goods then the demand for hamburgers will increase.

If the given commodity is an inferior good then decrease in income leads to rise in demand. So the demand for hamburgers will increase with decrease in income.

d. If the price of french fries (which people eat with hamburgers) falls then demand for hamburgers will increase.

Here hamburgers and french fries are complementary goods as they are used together to satisfy a particular want. So the demand for the hamburgers will rise due to fall in the price of hamburgers. A decrease in the price of complementary good (french fries) leads to increase in the demand for the given commodity (hamburgers).

2 a. Increase in the wage of fast food workers will decrease the supply of hamburgers.

When the amount payable to factors of production increases, the cost of production also increases. This reduces the profitability. As a result seller reduces the supply of the commodity.

b. A decrease in the price of ground beef will increase the supply of hamburgers.

The quantity supplied of a commodity depends on the the price of other commodities too. Increase in the price of other goods make them profitable in comparison to the given commodity. Whereas decrease in the price of the other good make them less profitable in comparison to given commodity. So decrease in the price of ground beef(other good) will make hamburgers (given commodity) more profitable, as a result the quantity supplied for hamburgers will increase.

c. Increase in the price of hamburgers will increase the supply of hamburgers.

Price of a commodity and its supply are directly related. It means, as price increases, the quantity supplied of the given commodity also rises.

d. The levying of an additional sales tax on all fast food decreases the supply of hamburgers as hamburgers are considered as fast foods.

Increase in taxes raises the cost of production and, thus, reduces the supply due to lower profit margin.

Rahul Sunny answered 8 months ago

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