Question

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 ______.

Options

• Proportionately large fall in quantity demanded

• No change in quantity demanded

• Proportionately small fall in quantity demanded

• Infinite change in quantity demanded

Answer 1

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 proportionately large fall in quantity demanded.

Explanation:

With elastic demand, quantity demanded changes proportionately more than price. A price rise therefore causes a proportionately large fall in quantity demanded.