he number of meals sold and the price charged for them are regulated in Karachi. The price currently charged is RS.500 a meal by JAY Restaurant. The Restaurant Association want to obtain government's permission to raise the prices to increase their revenue and ask you to be their economic adviser. After studying the market, you come up with the following demand schedule for restaurant meal when the income level was 2,500. Answer the following Questions and sub-parts as well: Price (Ruppees per meal) Quantity Demanded (per month) 300 160 400 120 500 80 600 40 700 0 a. Calculate the price elasticity of demand using midpoint method for meals as the price rises from Rs.500 to Rs.600. Is the demand price elastic or inelastic for this rise? b. What happens to the restaurants total Revenue if the price rises from Rs.500 to Rs.600? Should the restaurant owners try to obtain permission to raise the price? c. Graph the demand curve given the schedule above. d. Suppose the income of the consumer increased to 3,500 , increasing the demand for restaurant meals to 120 at price 500. Calculate income elasticity of demand and find if restaurant meal is a luxury or a necessity for the consumer. Also, illustrate it graphically.

he number of meals sold and the price charged for them are regulated in Karachi. The price currently charged is RS.500 a meal by JAY Restaurant. The Restaurant Association want to obtain government's permission to raise the prices to increase their revenue and ask you to be their economic adviser. After studying the market, you come up with the following demand schedule for restaurant meal when the income level was 2,500. Answer the following Questions and sub-parts as well: Price (Ruppees per meal) Quantity Demanded (per month) 300 160 400 120 500 80 600 40 700 0 a. Calculate the price elasticity of demand using midpoint method for meals as the price rises from Rs.500 to Rs.600. Is the demand price elastic or inelastic for this rise? b. What happens to the restaurants total Revenue if the price rises from Rs.500 to Rs.600? Should the restaurant owners try to obtain permission to raise the price? c. Graph the demand curve given the schedule above. d. Suppose the income of the consumer increased to 3,500 , increasing the demand for restaurant meals to 120 at price 500. Calculate income elasticity of demand and find if restaurant meal is a luxury or a necessity for the consumer. Also, illustrate it graphically.

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter19: Elasticity

Section19.1: Elasticity: Part 1

Problem 1ST: On Tuesday, the price and quantity demanded are 7 and 120 units, respectively. Ten days later, the...

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The number of meals sold and the price charged for them are regulated in Karachi. The price currently charged is RS.500 a meal by JAY Restaurant. The Restaurant Association want to obtain government's permission to raise the prices to increase their revenue and ask you to be their economic adviser. After studying the market, you come up with the following demand schedule for restaurant meal when the income level was 2,500.
Answer the following Questions and sub-parts as well:

Price (Ruppees per meal)                          Quantity Demanded (per month)
                300                                                                    160
                400                                                                    120
                500                                                                     80
                600                                                                     40
                700                                                                      0

a. Calculate the price elasticity of demand using midpoint method for meals as the price rises from Rs.500 to Rs.600. Is the demand price elastic or inelastic for this rise?
b. What happens to the restaurants total Revenue if the price rises from Rs.500 to Rs.600? Should the restaurant owners try to obtain permission to raise the price?
c. Graph the demand curve given the schedule above.
d. Suppose the income of the consumer increased to 3,500 , increasing the demand for restaurant meals to 120 at price 500. Calculate income elasticity of demand and find if restaurant meal is a luxury or a necessity for the consumer. Also, illustrate it graphically.

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