All other factors held constant, when McDonald's raises the price of its Quarter Pounder by 50 cents,
A) there is likely to be a decrease in the quantity of Taco Bell's Chalupas demanded, assuming the Quarter Pounder and Chalupas are substitutes.
B) there is likely to be an increase in demand for Taco Bell's Chalupas, assuming the Quarter Pounder and Chalupas are substitutes.
C) there is likely to be a decrease in demand for Taco Bell's Chalupas, assuming the Quarter Pounder and Chalupas are substitutes.
D) there is likely to be an increase in demand for McDonald's Quarter Pounder, assuming the Quarter Pounder and Chalupas are substitutes.

Question

Quizplus · Accepted Answer

When the price of a product increases, consumers tend to look for substitutes. If the Quarter Pounder and Chalupas are considered substitutes, an increase in the price of the Quarter Pounder would likely lead to an increase in demand for Chalupas as consumers switch to the more affordable option.

All Other Factors Held Constant, When McDonald's Raises the Price