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Suppose the demand for meals at a medium-priced restaurant is elastic. If the management of the restaurant is considering raising prices, it can expect a relatively :
- a)large fall in quantity demanded.
- b)large fall in demand.
- c)small fall in quantity demanded.
- d)small fall in demand.
Correct answer is option 'A'. Can you explain this answer?
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Most Upvoted Answer
Suppose the demand for meals at a medium-priced restaurant is elastic....
Elastic Demand and Price Increase
Elasticity of Demand
The elasticity of demand refers to the responsiveness of the quantity demanded of a good or service to a change in its price. When the demand for a good or service is elastic, a change in price leads to a relatively large change in the quantity demanded. On the other hand, when the demand is inelastic, a change in price leads to a relatively small change in the quantity demanded.
Price Increase and Elastic Demand
When the demand is elastic, a price increase will lead to a large fall in the quantity demanded. This is because consumers are sensitive to changes in the price of the good or service and may switch to substitutes or reduce their overall consumption. As a result, the total revenue of the business may decrease despite the increase in price.
Medium-Priced Restaurant
In the case of a medium-priced restaurant, if the demand for meals is elastic, increasing the prices can be risky. Consumers may opt to dine at competing restaurants or reduce their overall dining out frequency. This may lead to a significant fall in the quantity demanded, which can negatively impact the revenue and profitability of the restaurant.
Conclusion
In summary, in the case of a medium-priced restaurant with elastic demand, a price increase can lead to a large fall in the quantity demanded. As a result, the total revenue of the business may decrease despite the increase in price. Therefore, it is essential for the management of the restaurant to carefully evaluate the elasticity of demand before making pricing decisions.
Elasticity of Demand
The elasticity of demand refers to the responsiveness of the quantity demanded of a good or service to a change in its price. When the demand for a good or service is elastic, a change in price leads to a relatively large change in the quantity demanded. On the other hand, when the demand is inelastic, a change in price leads to a relatively small change in the quantity demanded.
Price Increase and Elastic Demand
When the demand is elastic, a price increase will lead to a large fall in the quantity demanded. This is because consumers are sensitive to changes in the price of the good or service and may switch to substitutes or reduce their overall consumption. As a result, the total revenue of the business may decrease despite the increase in price.
Medium-Priced Restaurant
In the case of a medium-priced restaurant, if the demand for meals is elastic, increasing the prices can be risky. Consumers may opt to dine at competing restaurants or reduce their overall dining out frequency. This may lead to a significant fall in the quantity demanded, which can negatively impact the revenue and profitability of the restaurant.
Conclusion
In summary, in the case of a medium-priced restaurant with elastic demand, a price increase can lead to a large fall in the quantity demanded. As a result, the total revenue of the business may decrease despite the increase in price. Therefore, it is essential for the management of the restaurant to carefully evaluate the elasticity of demand before making pricing decisions.
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Suppose the demand for meals at a medium-priced restaurant is elastic. If the management of the restaurant is considering raising prices, it can expect a relatively :a)large fall in quantity demanded.b)large fall in demand.c)small fall in quantity demanded.d)small fall in demand.Correct answer is option 'A'. Can you explain this answer?
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Suppose the demand for meals at a medium-priced restaurant is elastic. If the management of the restaurant is considering raising prices, it can expect a relatively :a)large fall in quantity demanded.b)large fall in demand.c)small fall in quantity demanded.d)small fall in demand.Correct answer is option 'A'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about Suppose the demand for meals at a medium-priced restaurant is elastic. If the management of the restaurant is considering raising prices, it can expect a relatively :a)large fall in quantity demanded.b)large fall in demand.c)small fall in quantity demanded.d)small fall in demand.Correct answer is option 'A'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Suppose the demand for meals at a medium-priced restaurant is elastic. If the management of the restaurant is considering raising prices, it can expect a relatively :a)large fall in quantity demanded.b)large fall in demand.c)small fall in quantity demanded.d)small fall in demand.Correct answer is option 'A'. Can you explain this answer?.
Suppose the demand for meals at a medium-priced restaurant is elastic. If the management of the restaurant is considering raising prices, it can expect a relatively :a)large fall in quantity demanded.b)large fall in demand.c)small fall in quantity demanded.d)small fall in demand.Correct answer is option 'A'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about Suppose the demand for meals at a medium-priced restaurant is elastic. If the management of the restaurant is considering raising prices, it can expect a relatively :a)large fall in quantity demanded.b)large fall in demand.c)small fall in quantity demanded.d)small fall in demand.Correct answer is option 'A'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Suppose the demand for meals at a medium-priced restaurant is elastic. If the management of the restaurant is considering raising prices, it can expect a relatively :a)large fall in quantity demanded.b)large fall in demand.c)small fall in quantity demanded.d)small fall in demand.Correct answer is option 'A'. Can you explain this answer?.
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Suppose the demand for meals at a medium-priced restaurant is elastic. If the management of the restaurant is considering raising prices, it can expect a relatively :a)large fall in quantity demanded.b)large fall in demand.c)small fall in quantity demanded.d)small fall in demand.Correct answer is option 'A'. Can you explain this answer?, a detailed solution for Suppose the demand for meals at a medium-priced restaurant is elastic. If the management of the restaurant is considering raising prices, it can expect a relatively :a)large fall in quantity demanded.b)large fall in demand.c)small fall in quantity demanded.d)small fall in demand.Correct answer is option 'A'. Can you explain this answer? has been provided alongside types of Suppose the demand for meals at a medium-priced restaurant is elastic. If the management of the restaurant is considering raising prices, it can expect a relatively :a)large fall in quantity demanded.b)large fall in demand.c)small fall in quantity demanded.d)small fall in demand.Correct answer is option 'A'. Can you explain this answer? theory, EduRev gives you an
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