[amp_mcq option1=”Large fall in quantity demanded” option2=”Large fall in demand” option3=”Small fall in quantity demanded” option4=”Small fall in demand” correct=”option1″]
The correct answer is: A. Large fall in quantity demanded.
Demand is elastic when a small change in price leads to a large change in quantity demanded. In other words, consumers are very sensitive to changes in price. If the management of a medium-priced restaurant raises prices, it can expect a relatively large fall in the quantity of meals demanded. This is because consumers will be more likely to choose to eat at a lower-priced restaurant or cook at home.
Option B is incorrect because it states that the management of the restaurant can expect a large fall in demand. This would be the case if demand was inelastic, but the question states that demand is elastic.
Option C is incorrect because it states that the management of the restaurant can expect a small fall in quantity demanded. This would be the case if demand was inelastic, but the question states that demand is elastic.
Option D is incorrect because it states that the management of the restaurant can expect a small fall in demand. This would be the case if demand was inelastic, but the question states that demand is elastic.