Question 3
The following is a demand schedule for cheeseburgers for an individual.Plot the demand curve for cheeseburgers, with price on the Y-axis, and quantity demanded per week on the X-axis.
PRICE OF CHEESEBURGERS | QUANTITY DEMANDED |
5.00 | 0 |
4.50 | 1 |
4.00 | 2 |
3.50 | 3 |
3.00 | 4 |
2.50 | 5 |
2.00 | 6 |
1.50 | 7 |
1.00 | 8 |
0.50 | 9 |
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Plot the demand curve for cheeseburgers, with
price on the Y-axis, and quantity demanded per week on the X-axis.
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Assume the individual has a fixed budget of £24 per week to spend on
burgers, and the current price of cheeseburgers and chicken burgers
is £3.00, and that a consumer buys 4 of each type of burger. Now
assume that the price of cheeseburgers falls to £2. Using the
concept of the ‘income’ and ‘substitution’ effect, explain why the
demand for cheeseburgers rises to 6.
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Assuming chicken and cheeseburgers are perfect substitutes, and
income is fixed at £24, what is likely to happen to the demand for
chicken burgers (to the nearest burger) if the price of
cheeseburgers rises to £4.00?
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