Consider the market for Chinese food in a large city like Philadelphia.If the number of Chinese restaurants increases and the price elasticity of demand for Chinese food is 2.0,then the equilibrium price of Chinese food will ________,the equilibrium quantity demanded of Chinese food will ________,and total Chinese food revenue will ________.
A) decrease; increase; decrease
B) increase; decrease; increase
C) decrease; increase; increase
D) increase; decrease; decrease

Question

Quizplus · Accepted Answer

The increase in the number of Chinese restaurants will increase the supply of Chinese food, leading to a decrease in the equilibrium price. The price elasticity of demand for Chinese food is 2.0, which means that a 1% decrease in price will lead to a 2% increase in quantity demanded. Therefore, the equilibrium quantity demanded of Chinese food will increase. Total Chinese food revenue is calculated as the equilibrium price multiplied by the equilibrium quantity demanded. Since the equilibrium price decreases and the equilibrium quantity demanded increases, total Chinese food revenue will increase.

Consider the Market for Chinese Food in a Large City