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Case Study

The document contains sales data showing changing demand for Big Macs on regular and extra calendar days. It illustrates this using indifference curves and budget lines to show the combinations of Big Mac sales that give equal utility to consumers given their income budget. It identifies factors like price changes, income levels, and substitution effects that influence demand. Competitors are likely affected by McDonald's increased sales. Demand for Big Macs is considered elastic as changes in price impact the quantity demanded over time.

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Princess Orna
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202 views

Case Study

The document contains sales data showing changing demand for Big Macs on regular and extra calendar days. It illustrates this using indifference curves and budget lines to show the combinations of Big Mac sales that give equal utility to consumers given their income budget. It identifies factors like price changes, income levels, and substitution effects that influence demand. Competitors are likely affected by McDonald's increased sales. Demand for Big Macs is considered elastic as changes in price impact the quantity demanded over time.

Uploaded by

Princess Orna
Copyright
© © All Rights Reserved
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
You are on page 1/ 2

ORNA, PRINCESS P.

1BA1D

1. Illustrate and explain the changing demand for Big Mac using the indifference curve and budget line

Sales of Big Mac

Percentage of Big Mac Percentage of Big Mac


sales in Regular day sales in Extra Calendar
day

4% 2.8%

4.1% 0.7%

6.8% 0.2%

Budget line
X Y

4% 4.46% 2.8% 3.12%

4.1% 17.86% 0.7% 3.04%

6.8% 62.5% 0.2% 1.84%

Income= $12.50

Computation : To find x and y

x=4 % y=2.8%

x=(2.8%)= $12.50

(2.8%) (2.8%)

x=4.46

y=(4%)=$12.50

(4%) (4%)

y=3.12%

The graph shows the indifference curve which is a line showing all the combinations of two sales of the
Big Mac which give a consumer equal utility. In other words, the consumer would be indifferent to these
different combinations.While the graph of budget line shows the combination of the sales of the Big Mac
that can be afforded with your current income.

2. In this case study, what do you think are the factors affecting the increased demand for Big Mac? What
about the competitor food chains? How do you think they are affected by this increased sales for
McDonald's?

The factors that affecting the increased of demand for Big Mac is the effect due to the price change of
one commodity or the prize effect. Next is the effect due to the change in income of the consumer or the
income effect. Lastly, the effect due only to the relative price change in the commodities or the
substitution effect. The competitor food chains will also be affected because it might decrease their
sales. They will be affected because the consumer will patronize more the goods/products of
McDonald's than to their products because it has a lesser price or simply very affordable.

3. Do you consider the demand for Big Mac elastic or inelastic?. Explain.

It is elastic demand because as the price of Big Mac changes the consumer will still buy it. Therefore,as
the price changes over time it has an impact to the quantity demanded.

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