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

Answer: Inelastic demand

Explanation:

When new restaurants have opened in College town in recent years, the supply for restaurant meals increase. This will lead to a rightward shift in the supply curve for restaurant meals leading to a fall in the price and an increase in the quantity. The fall in price will be larger the more inelastic demand is.  When demand is more elastic then a fall in price will be less when supply increases.