You manage a 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 your bouncer thinks the demand for drinks is _____ and your bartender thinks the demand for drinks is _____.

Question

Quizplus · Accepted Answer

The bouncer believes that raising prices will increase revenue, which implies that the demand is inelastic (consumers will still buy despite higher prices). The bartender believes that lowering prices will increase revenue, which implies that the demand is elastic (consumers will buy significantly more if prices are lower).

You Manage a Nightclub, and Lately Revenues Have Been Disappointing