Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 3: Problem 2

In a supply and demand diagram, draw the shift of the demand curve for hamburgers in your hometown due to the following events. In each case, show the effect on equilibrium price and quantity. a. The price of tacos increases. b. All hamburger sellers raise the price of their french fries. c. Income falls in town. Assume that hamburgers are a normal good for most people. d. Income falls in town. Assume that hamburgers are an inferior good for most people. e. Hot dog stands cut the price of hot dogs.

Short Answer

Expert verified
Answer: An increase in the price of tacos makes hamburgers more relatively attractive, causing the demand for hamburgers to increase. This results in a rightward shift of the demand curve, and both the equilibrium price and quantity of hamburgers will increase.

Step by step solution

01

Scenario 1: The price of tacos increases

Since tacos can be considered a substitute good for hamburgers, an increase in the price of tacos makes hamburgers more relatively attractive. Therefore, the demand for hamburgers will increase. This causes the demand curve to shift rightward. As a result, equilibrium price and quantity of hamburgers will both increase.
02

Scenario 2: Hamburger sellers raise the price of their french fries

If french fries and hamburgers are considered complementary goods, raising the price of french fries may make customers less likely to buy hamburgers. This would lead to a decrease in demand for hamburgers, causing the demand curve to shift leftward. The equilibrium price and quantity of hamburgers would both decrease.
03

Scenario 3: Income falls in town, hamburgers are a normal good

If hamburgers are considered a normal good, a decrease in income will lead to a decrease in demand for hamburgers. This causes the demand curve to shift leftward. Consequently, the equilibrium price and quantity of hamburgers will both decrease.
04

Scenario 4: Income falls in town, hamburgers are an inferior good

If hamburgers are considered an inferior good, a decrease in income will actually lead to an increase in demand for hamburgers. This will cause the demand curve to shift rightward. Therefore, the equilibrium price and quantity of hamburgers will both increase.
05

Scenario 5: Hot dog stands cut the price of hot dogs

Since hot dogs can be considered a substitute good for hamburgers, a decrease in the price of hot dogs makes hamburgers less relatively attractive. This leads to a decrease in demand for hamburgers, causing the demand curve to shift leftward. As a result, the equilibrium price and quantity of hamburgers will both decrease.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

In recent years, the number of car producers in China has increased rapidly. In fact, China now has more car brands than the United States. In addition, car sales have climbed every year and automakers have increased their output at even faster rates, causing fierce competition and a decline in prices. At the same time, Chinese consumers' incomes have risen. Assume that cars are a normal good. Draw a diagram of the supply and demand curves for cars in China to explain what has happened in the Chinese car market.

Use a diagram to illustrate how each of the following events affects the equilibrium price and quantity of pizza. a. The price of mozzarella cheese rises. b. The health hazards of hamburgers are widely publicized. c. The price of tomato sauce falls. d. The incomes of consumers rise and pizza is an inferior good. e. Consumers expect the price of pizza to fall next week.

After several years of decline, the market for handmade acoustic guitars is making a comeback. These guitars are usually made in small workshops employing relatively few highly skilled luthiers. Assess the impact on the equilibrium price and quantity of handmade acoustic guitars as a result of each of the following events. In your answers indicate which curve(s) shift(s) and in which direction. a. Environmentalists succeed in having the use of Brazilian rosewood banned in the United States, forcing luthiers to seek out alternative, more costly woods. b. A foreign producer reengineers the guitar-making process and floods the market with identical guitars. c. Music featuring handmade acoustic guitars makes a comeback as audiences tire of heavy metal and alternative rock music. d. The country goes into a deep recession and the income of the average American falls sharply.

Although he was a prolific artist, Pablo Picasso painted only 1,000 canvases during his "Blue Period." Picasso is now dead, and all of his Blue Period works are currently on display in museums and private galleries throughout Europe and the United States. a. Draw a supply curve for Picasso Blue Period works. Why is this supply curve different from ones you have seen? b. Given the supply curve from part a, the price of a Picasso Blue Period work will be entirely dependent on what factor(s)? Draw a diagram showing how the equilibrium price of such a work is determined. c. Suppose rich art collectors decide that it is essential to acquire Picasso Blue Period art for their collections. Show the impact of this on the market for these paintings.

The market for many goods changes in predictable ways according to the time of year, in response to events such as holidays, vacation times, seasonal changes in production, and so on. Using supply and demand, explain the change in price in each of the following cases. Note that supply and demand may shift simultaneously. a. Lobster prices usually fall during the summer peak lobster harvest season, despite the fact that people like to eat lobster during the summer more than at any other time of year. b. The price of a Christmas tree is lower after Christmas than before but fewer trees are sold. c. The price of a round-trip ticket to Paris on Air France falls by more than \(\$ 200\) after the end of school vacation in September. This happens despite the fact that generally worsening weather increases the cost of operating flights to Paris, and Air France therefore reduces the number of flights to Paris at any given price.
See all solutions

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free