A Miami restaurant has created atmosphere through its subtle use of blue and green lighting, ceiling fans over each table, and frozen drinks. If its electrical energy supplier raises its prices, the restaurant will most likely ________.
A) raise the prices of all menu items because it has an elastic demand for electricity
B) ask other Miami restaurants to create a derived demand for cheaper electricity
C) decide to find other ways to use electricity
D) continue its present operation because it has an inelastic demand for electricity
E) remove its lighting, turn off its fans, and economize on its use of electricity

Question

Quizplus · Accepted Answer

The restaurant has created a specific atmosphere that is important to its customer experience, so removing lighting and fans would negatively impact that experience. Therefore, the restaurant is likely to continue its present operation even if the price of electricity increases, indicating an inelastic demand for electricity. Additionally, option A is unlikely as electricity costs are a relatively small proportion of the restaurant's total costs, so raising prices of menu items would not be the best solution. Option B is not a feasible option as the restaurant has no control over the electricity supplier's prices. Option C is also unlikely as the restaurant's use of electricity is already limited to creating the necessary atmosphere.

A Miami Restaurant Has Created Atmosphere Through Its Subtle Use