Home › AP Microeconomics › Economics › Elasticity › Table 5.2 lists restaurant meals as the most ela…
Table 5.2 lists restaurant meals as the most elastic good, with a demand elasticity of 2.27. If restaurant prices rise by 10 percent, what does the source say happens to quantity demanded?
AIt increases by 22.7 percent
BIt stays exactly the same
CIt decreases by 22.7 percent
DIt decreases by 2.27 percent
Answer & Solution
Correct answer: C. It decreases by 22.7 percent
1. Restaurant meals have a demand elasticity of 2.27, well above one, so demand is highly elastic.
2. Elasticity of 2.27 means a 10 percent price change produces roughly 2.27 times 10 percent change in quantity.
3. A 10 percent price increase leads to a 22.7 percent decrease in quantity demanded.
4. Quantity demanded moves opposite to price along a demand curve, ruling out any option showing an increase.
_Source: OpenStax Principles of Microeconomics for AP Courses (CC BY 4.0), Ch 5 "Elasticity", section 5.3 | Elasticity and Pricing_
Related questions
Netflix officials expected to lose about 600,000 subscribers after the 2011 price increaseNetflix officials expected to lose about 600,000 of their roughly 24.6 million US subscribIn 2011, Netflix raised the price for customers who wanted to keep both streaming video anAccording to the source, at least in the short run, how does the elasticity of savings witAccording to the source, how does the wage elasticity of labor supply typically compare beCoffee and sugar are complement goods, according to the source's example. What sign does tCoffee and tea are substitute goods, according to the source's example. What sign does theHow is the cross-price elasticity of demand defined?