Answer to Question #75959 in Microeconomics for John

Question

Nonjabulo thinks that McDonald’s hamburgers are the best – much better than Steers’ – while Anne cannot tell the difference:
a) Anne’s demand for McDonald’s hamburgers is likely to be more price elastic than Nonjabulo’s.
b) Nonjabulo’s demand for McDonald’s hamburgers is likely to be more price elastic than Anne’s.
c) Anne’s demand for all hamburgers is less price elastic than Nonjabulo’s.
d) Nonjabulo’s demand for all hamburgers is more price elastic than Anne’s

Answer 1

If Nonjabulo thinks that McDonald’s hamburgers are the best – much better than Steers’ – while Anne cannot tell the difference, then:
a) Anne’s demand for McDonald’s hamburgers is likely to be more price elastic than Nonjabulo’s.
This is because -the more easily a shopper can substitute one product with a rising price for another, the more the price will fall – i.e. be "elastic." Hence as Anne cannot tell the difference between the McDonald’s hamburgers and others, so Anne will more likely to opt for other hamburger if the price of McDonald’s hamburgers rises and vice-versa.

Answer: Anne’s demand for McDonald’s hamburgers is likely to be more price elastic than Nonjabulo’s.