Jonah lives in a small town where there is only one Mexican restaurant.Which of the following is likely to be true about the price elasticity of demand for meals at the Mexican restaurant?
A)Demand is likely to be perfectly inelastic.
B)Demand is likely to be perfectly elastic.
C)Demand is likely to be relatively elastic.
D)Demand is likely to be relatively inelastic.

Question

Quizplus · Accepted Answer

Since there is only one Mexican restaurant in the town, consumers have limited options to substitute for meals at the Mexican restaurant. Therefore, even if the price of the meals increases slightly, consumers are not likely to switch to other restaurants. This suggests that demand is likely to be relatively inelastic.

Jonah Lives in a Small Town Where There Is Only