Question

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

Answer 1

Answer: (A)

Large fall in quantity demanded

Since the demand is elastic $(E>1)$ and if prices are raised then demand will fall by a large amount.
Suppose the demand for meals at a medium-priced restaurant is elastic. If the management of the restaurant is considering rasiing prices, it can expect a relatively large fall in quantity demanded.