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If your restaurant raises the price for a lasagna entree from $12 to $13, the restaurant's total revenue will go up if: a
If your restaurant raises the price for a lasagna entree from $12 to $13, the restaurant's total revenue will go up if:
a. Price elasticity of lasagna is -2.0
b. Income elasticity suggests your lasagna is a "normal" good
c. The lasagna item has an inelastic demand
d. The parking garage next to the restaurant increases prices by 25%
Expert Solution
c. The lasagna item has an inelastic demand
The total revenue directly relates to teg price if the inelastic demand is present. Here, the demand elasticity is not given. If it is inelastic, the increasing price would give a higher total revenue. if the demand is elastic, the increasing price would give less total revenue. Hence, to go total revenue up, the demand should be inelastic.
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