Lunch Counter The Lunchbox is one of many options for workers in Lanford, IL to get a quick and tasty meal at reasonable prices. They wanted to raise prices but did not know if the demand would fall off too much. They decided to raise prices and wait
and see before making the increases permanent. In the first week after they raised prices on the menu an average of 10%, they served fewer lunches but their revenue did not fall. Based on this, they decided to keep the new menu. Would you expect revenue to continue at this level?
Some customers do not patronize the Lunchbox every week. If they visited during the first week of the price increase, they may have stayed and purchased a meal there, but decided to visit less often in the future. In this case, demand becomes more elastic as more time passes. Because demand is more elastic in the long-run, they can expect quantity to fall further and revenues to begin to fall too.
You might also like to view...
The figure above shows the market for airline tickets. If airline tickets are a normal good, then the recession in 2008 that caused people's incomes to decrease led to a shift from
A) D0 to D1. B) D1 to D0. C) S0 to S1. D) S1 to S0.
A rise in the price of a bond causes the yield of the bond to
A) rise. B) fall. C) remain unchanged. D) rise if it's a short-term bond, fall if it's a long-term bond.
A firm's total investment in receivables depends primarily on the firm's:
A. total sales and cash discount period. B. cash to credit sales ratio. C. bad debt ratio. D.average collection period and amount of credit sales. E. amount of credit sales and cash discount percentage.
Eggs have a supply curve that is linear and upward-sloping and a demand curve that is linear and downward-sloping. If a 2 cent per egg tax is increased to 3 cents, the deadweight loss of the tax
a. increases by exactly 50 percent. b. increases by less than 50 percent and may even decline. c. increases by more than 50 percent.