Reference no: EM131423871
Bon Apetit: French Restaurant
Percentage increase in the price of its meals = 4%
Percentage change (decrease) in the quantity demanded = -(3)
Price elasticity (PED) = -0.03 / 0.04
PED of meals in Bon Apetit = - (0.75).
Since the PED is less than 1 the demand is inelastic. Which means a rise in price leads to a rise in total revenue.
** Cross price elasticity of demand = % change in the quantity demanded of A / % change in the price of B
-0.75 = % change in quantity demand of A / -0.04
On account of another French restaurant reducing the price of meal by 3%:
% change in the quantity demand of Apetit's meals = -0.75 x -0.04
Percentage change in quantity demanded = 0.03
Demand for Apetit meals will increase by 3%.
** Income elasticity of demand = % change in quantity demanded / % change in price
Income elasticity of demand for meals at Bon Apetit = 0..03 / 0.05
Income elasticity of demand for meals at Bon Apetit = 0.6
As the demand of meals increases when income increases, meals at Bon Apetit are considered to be normal goods.
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Bon apetit-french restaurant
: Bon Apetit: French Restaurant Percentage increase in the price of its meals = 4% Percentage change (decrease) in the quantity demanded = -(3) Price elasticity (PED) = -0.03 / 0.04
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