Final answer:
When the price of substitute goods decreases, both the
equilibrium price and quantity of hamburgers decrease,
due to consumers shifting their consumption towards the cheaper substitutes.
Step-by-step explanation:
If the price of substitute goods decreases, this typically leads to a decrease in the equilibrium price and quantity of hamburgers in the market.
The reason is that consumers will shift their consumption towards the now-cheaper substitutes, such as hot dogs, and as a result, the demand for hamburgers will decrease.
A lower demand for hamburgers drives down the price at which the market clears, meaning the equilibrium price falls. At the same time, with the demand lower, the equilibrium quantity of hamburgers sold will also decrease.
Considering these factors, the correct answer to the student's question is D) Equilibrium price and quantity both decrease.
If the price of substitute goods decreases, the equilibrium price and quantity of hamburgers in the market will be affected.
When the price of substitute goods decreases, the demand for hamburgers will increase as consumers switch from the substitute goods to hamburgers.
This increase in demand will lead to an increase in both the equilibrium price and quantity of hamburgers in the market.