Sam owns a taco restaurant,and he conducted a consumer survey that indicates that the price elasticity of demand for his restaurant is 3.5.You would advise Sam to
A)Raise his price to increase revenues.
B)Keep his price the same to maximize revenues.
C)Lower his price to increase revenue.
D)Offer more high-priced products.

Question

Quizplus · Accepted Answer

A price elasticity of demand of 3.5 indicates that the demand for Sam's restaurant is relatively elastic, meaning that a small change in price can lead to a large change in the quantity demanded. Therefore, Sam should lower his price to increase revenue, as the increase in quantity demanded from the lower price will outweigh the decrease in revenue from the lower price per unit.

Sam Owns a Taco Restaurant,and He Conducted a Consumer Survey