Question

What happens to the market demand for McDonald’s hamburgers when ­­­______?

-McDonald’s reduces the price of its hamburgers, while the price of Burger King’s hamburgers remains unchanged

The question presents a change in the demand environment for McDonald’s hamburgers. The assumption of "ceteris paribus" (other things being equal) is made in each case.

For each question, you should begin by drawing a typical market demand curve for McDonald’s hamburgers. For each question, you must both explain your answer verbally and illustrate your answer graphically. Label the axes of your graph and label or otherwise identify the curve(s) in your graph. If you use abbreviations, state what the abbreviations mean.

Your answer should include the following statements:

(a) the demand curve to which the result pertains (it is: “the demand curve for McDonald’s hamburgers”).

(b) whether the result involves “a movement along” the demand curve or “a shift in” the demand curve.

(c) specification of the direction of the “movement along” or “shift.”

(d) why the “moving along” or “shift” occurs.

Answer 1