Question

Many new restaurants have opened in Collegetown in recent years. Given this change in supply, what type of demand would result in a larger drop in prices for restaurant meals?

Answer 1

The answer is : Elastic Demand. The elasticity of demand shows the responsiveness of the quantity demanded to the change in price. An elastic demand means that the demand is affected by changes in price. While an inelastic demand means that the supply is not affected by changes in price at all.

Answer 2

Answer: Elastic supply

Explanation: since many new restaurants have opened in College town in recent years, this will have a direct impact on supply. Elastic type of demand would result in a larger drop in prices for restaurant meals this is because in elastic demand when the price changes by a small ratio the quantity demanded changes by a larger ratio. Hence when there will be a large number of restaurants, they will engage in price competition.