The price of hamburgers drops suddenly and you discover that you and your friends eat more hamburgers....?

Question

The price of hamburgers drops suddenly and you discover that you and your friends eat more hamburgers. Assume that hamburgers are a normal good. The change in quantity demanded resulting from the change in price is due to:


A income and substitution effects.
B the increase in hamburger quality.
C the law of supply.
D an increase in demand.

Answer 1

Try and figure out why the price went down suddenly. Something obviously happened. Does the question say anything about income? No. Substitution would be like the price of hot dogs went up and that is also not mentioned. So A is actually not correct. O.k., then B. Do we know anything about the quality? No. So skip that one. What about supply? What happens when for some reasons suddenly a whole lot of something is on the market. Think fruit in season, for example. Because there is so much of it out there and everyone can easily get it, what happens to the price? Right. It goes down. So C is the right answer but I really want you to at least think about it a little so I'm not just helping you cheat on a test. D is wrong because there is no information given saying that hamburgers have become more popular for any other reason than the price went down. If they became the totally cool food to eat the price would probably actually increase, not decrease as in the question. Please try and learn this stuff. It is pretty important.

Answer 2

A.
There is no increase in hamburger quality.
There is no change in supply -- the number of available hamburgers has not changed.
There is no increase in demand -- you eat the same total amount of hamburgers and non-hamburgers..
You and your friends choose to substitute hamburgers for other food as they have become relatively less expensive.

Answer 3

C. Law of supply.

they made too much hamburgers to sell. if they decrease the price more people will be able to buy.