Answer to Question #221583 in Microeconomics for Tumi

Question

The cross elasticity of demand between a McDonalds burger and a Nandos burger is

 A. negative because McDonalds burger and Nandos burger are complements.

 B. negative because McDonalds burger and Nandos burger are substitutes.

 C. positive because McDonalds burger and Nandos burger are complements.

 D. positive because McDonalds burger and Nandos burger are substitutes.

Answer 1

B. negative because McDonalds burger and Nandos burger are substitutes.

This is because McDonald's burger will experience competition because of the Nandos burger. Therefore, in both cases there will be a decrease in terms of sales based on the substitutes, making the cross elasticity of demand to be negative