• March 15th, 2016

Demand and supply

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Bon Appétit is a French restaurant that recently increased the average price of its meals by 4%. As a result, the number of customers dropped by 3%. Based on this information, what is the price elasticity of demand for meals at Bon Appétit? How will this 4% increase of the average price of meals impact total revenue at Bon Appétit? (10 points) Another French restaurant in the area that competes with Bon Appétit decided to reduce the average price of its meals by 3%. How will this decision likely impact the demand for meals at Bon Appétit? (5 points) Assume that the average disposable income in the area in which it operates increases by 5% over the last year. As a result, the number of customers at Bon Appétit increased by 3%. Based on this information, what is the income elasticity of demand for meals at Bon Appétit? Are meals at Bon Appétit considered normal goods? (10 points)

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