You manage a popular nightclub and lately revenues have been disappointing.Your bouncer suggests that raising drink prices will increase revenues, but your bartender suggests that decreasing drink prices will increase revenues.You aren't sure who is right, but you do know that:

Question

Quizplus · Accepted Answer

The bouncer's suggestion to raise prices implies that he believes the demand for drinks is inelastic, meaning that customers will continue to purchase drinks despite the price increase. On the other hand, the bartender's suggestion to decrease prices suggests that he believes the demand for drinks is elastic, meaning that customers are price sensitive and would purchase more drinks if the price was lowered. Therefore, both the bouncer and bartender have opposite beliefs about the elasticity of demand for drinks, leading to choice B being the correct answer.

You Manage a Popular Nightclub and Lately Revenues Have Been