Question

State whether each of the following events will result in a movement along the demand curve for McDonald’s Big Mac burgers or whether it will cause the curve to shift. If the demand curve shifts, indicate whether it will shift to the left or to the right and draw a graph to illustrate the shift.
a. The price of Hungry Jack’s Whopper burgers declines.
b. McDonald’s distributes vouchers for $1.00 off on a purchase of a Big Mac.
c. A shortage of potatoes causes the price of fries to increase.
d. KFC raises the price of a bucket of fried chicken.
e. The Australian economy enters a period of rapid growth in incomes.

Answer 1

Basic Principle - Only the change in price of Big Mac burgers will cause a change in demand to have movement along the curve else curve shift will happen because of exogenous factors.

A. Price of substitute goods decrease will cause lowering of demand of Mac burgers therefore demand curve will shift leftwards.

B. Since vouchers will make price of Big Mac lower therefore demand will increase and movement along the curve will happen.

C. Price of complementary goods have increased therefore demand for burgers will reduce and demand curve will shift left.

D. Considering both as substitute goods, price increase of chicken will lead to increase in demand of Big Mac. Hence, demand curve will shift rightwards.

E. Increase in income will cause demand of burgers to increase thereby resulting in rightwards shift of demand curve.

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