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25 views3 pages

5

Uploaded by

Fiz Abdulrakman
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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1.

Analyze the demand function for a dinner in the restaurant Fancy Foods, given the four

changes listed below:

(a) The restaurant down the street, Gourmet Meals, features a two for one meal special.

A decrease in the price of substitute products will reduce demand for Fancy

Foods. It will reduce both the quantity and price of food at Fancy Foods. Because they

are in the same industry, Fancy Meals restaurant is a substitute for Delicious Food

restaurant. When Fancy Meals offers a two-for-one meal deal, many customers will

choose that restaurant over Delicious, lowering the demand for Delicious food. If a

competitor restaurant lowers the price of its meals, Fancy Foods' demand will fall, and to

compensate, they should either lower the price of the food or implement a unique as well.

(b) The opera provides a coupon for a 15% discount at FancyFoods for a meal with a 6:00pm

reservation on opera evenings.

Consumers will increase their demand for food from FancyFoods in response to

lower food prices. The opera coupon will bring in more customers who will enjoy

Delicious Food. When the price of a meal at Delicious Food is reduced by 15%, demand

increases. Delicious food's demand curve will rise and shift to the right. This coupon may

increase the demand curve because consumers may be motivated to eat at the restaurant

due to the voucher. If the increase in demand is significant, the restaurant will not lose

money but will increase income.


(c) Always Round Tire runs a special on tires; a 30 percent reduction in price if you buy four

tires.

Discounted Tires and the Delicious Food restaurant have no affiliation. Tires are

neither supplements nor replacements for restaurant meals. A tire special will not affect

the restaurant's price/demand curve. Bob's Suppose Bob's Discounted Tires and the

Delicious Food restaurant are close to each other. In that case, Bob's Discounted Tires

customers may visit the Delicious Food restaurant, which may increase Delicious Food's

demand curve. A 30% discount, on the other hand, will increase demand for Bob's

Discounted Tires.

(d) The main employer in town provides a large increase in salaries for white-collar workers.

This increase in income will shift the demand for dinners at Fancy Foods to the

right. This increase in demand will result in an increase in the volume of meals sold and

an increase in meal prices. Customers' income has a significant impact on the demand for

a product or service. A 5% increase in white-collar worker pay will increase demand for

Delicious Food meals. The demand curve will increase and shift to the right. An increase

in salary in the town can influence food consumption in the restaurant, so both demand

and price may rise.

2. The law of demand states the basic price/quantity relationship of consumption incentives.

What does the concept of 'price elasticity' add to that knowledge?


The concept of price elasticity of demand seeks to quantify the sensitivity of

demand to the price of a good or service. Thus, if demand is elastic, even minor price

changes have a significant impact on demand. In contrast, if demand is inelastic,

variations in the goodwill price do not significantly impact demand, implying that

consumers will continue to demand that particular good or service. A price increase will

result in a significant increase in the quantity demanded or supplied. In addition, The

concept of price elasticity explains how consumers are affected by changes in the

price/quantity relationship.

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