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A restaurant manager has estimated that the price elasticity of demand for meals is 2. If the restaurant increases menu prices by 5%, she can expect the number of meals sold to decrease by _____ and total revenue to _____.

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tutorAnne

Answer:  10%, fall

Explanation:

Elasticity of demand = % change in Quantity demanded/ % change in price

therefore  % change in Quantity demanded

=2 x 5= 10%

ii) fall , this is due to the decrease in demand which is more than the increase in price.

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