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Chapter 3: Q.39 (page 79)

Consider the demand for hamburgers. If the price of a substitute good (for example, hot dogs) increases and the price of a complement good (for example, hamburger buns) increases, can you tell for sure what will happen to the demand for hamburgers? Why or why not? Illustrate your answer with a graph.

Short Answer

Expert verified

If the price of a substitute good rises, the demand for hamburgers will rise. If price of complements increases, the demand for hamburgers will reduce. The net change cannot be determined.

Step by step solution

01

Concept introduction

Shifts in demand takes place because of change in various factors that affect the demand for a product such as price of related goods,population, income, etc.

02

Explanation

In isolation, the increase in price of substitutes should increase the demand for hamburgers. While an increase in the price of complements should decrease the demand for hamburgers. In case of a simultaneous increase in price of complements and substitutes, the net change in demand cannot be determined.

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