Consider the market for McDonald’s hamburgers in Moscow. What outcomes does the basic model of supply and demand predict in this market if Zip’s decides to lower the prices on all of their hamburgers?
a. Price and quantity of McDonald’s hamburgers will both decrease
b. Price and quantity of McDonald’s hamburgers will both increase
c. Price of McDonald’s hamburgers will increase, quantity will decrease
d. Price of McDonald’s hamburger will decrease, quantity will increase
Amongst all the options, Option D is correct which says that “Price of McDonald’s hamburger will decrease, quantity will increase”. According to the situation which gives a hypothetical situation that Zip decides to lower the price of all the hamburgers of McDonald’s. This will effect the demand and supply of the hamburgers positively. There is an inverse relationship between price of the hamburgers and the demand. As the price decreases the demand increases and the supply also increases.
Hence, this will help Mcdonald’s to increase their sales.