When McDonald's runs a special for hamburgers reducing the price of Big Macs to $0.99 with all other factors held constant
A) there is likely to be an increase in the quantity of Taco Bell's Chalupas demanded assuming Big Macs and Chalupas are substitutes.
B) there is likely to be a decrease in demand for Taco Bell's Chalupas assuming Big Macs and Chalupas are substitutes.
C) there is likely to be an increase in demand for Taco Bell's Chalupas assuming Big Macs and Chalupas are substitutes.
D) there is likely to be an increase in demand for McDonald's Big Macs assuming Big Macs and Chalupas are substitutes.

Question

Quizplus · Accepted Answer

When the price of Big Macs reduces, it becomes relatively cheaper compared to Chalupas, assuming they are substitutes. Therefore, consumers are likely to switch from consuming Chalupas to consuming Big Macs, leading to a decrease in demand for Chalupas.

When McDonald's Runs a Special for Hamburgers Reducing the Price