Question

Bob's Burgers charged $3.50 for a quarter-pound hamburger with all the fixin's, and sold 7,500 of them. The following year, although Bob raised the price to $3.75, sales of his burgers rose to 8,200. Use the concepts of a shift in the demand curve versus a movement along the demand curve to explain why this increase in sales does not represent a violation of the law of demand.

Answer 1

Here from one year to another, although price of hamburger increases from $3.50 to $3.75, sales of his burgers increases from 7500 to 8200 hamburgers. Here as price increases, sales of hamburgers increase as well. Still it does not violate the law of demand because there are many parameters which leads to an increase in demand. For example consumer may expect an increase in the level of income, or the price of complements such as cold drinks may have declined which leads to an increase in the demand for hamburgers. Here price of hamburgers increases, there is an upward movement along the demand curve. Here as demand for hamburger increases, demand curve for hamburgers shift rightward. Thus here as price of hamburgers increase, demand for hamburger increases, hence, the shift of demand curve outweigs the movement along the demand curve so here the law demand is not violated.