Answer to Question #139019 in Microeconomics for Jackson

Question

Consider the demand for hamburgers. If the price of a substitute good (for example, hot dogs) increases, what will happen to the demand for hamburgers? Draw supply and demand diagram and show the effect by shifting hamburgers demand curve and show the old CS & PS and the new CS & PS on the graph.

Answer 1

Substitute goods are those used in place of one another, so that a person rarely buys both at the same time. Hamburgers and hot dogs are considered substitutes in our case. An increase in the price of hot dogs will result more customers opting for hamburgers holding other factors constant. Thus, the demand for hamburgers generally increase and the demand curve shifts to the right as shown in the curves. The CS nad PS are as shown: