Jamal,Lawson and Kyle have been standing in line for almost an hour waiting to be served at Kirala,a popular new Japanese restaurant.It is possible that some of the people in line won't be served at all before the restaurant closes.Which of the following could explain why the restaurant does not simply raise prices high enough to eliminate the lines?
a.In situations where consumption takes place publicly,demand for the product is also influenced by how many other people are buying the product.Consequently,a popular restaurant that increased its prices enough to eliminate lines might find that it had also eliminated its popularity.
b.Firms may sometimes not raise their prices for fear that it violates people's sense of fairness and might alienate customers.
c.The demand for restaurant meals is relatively elastic and if the firm raise prices it will lower its profits.
A)a only
B)a and b only
C)a and c only
D)a, b, and c

Question

Quizplus · Accepted Answer

Option A is correct in pointing out that popularity of a restaurant can be influenced by the number of people buying the product. However, option C is not a strong reason for the restaurant to not raise its prices, as it assumes that demand is highly elastic which may not be the case for a popular restaurant. Option B provides a more plausible reason for the restaurant to not raise its prices as it suggests that customers may feel it is unfair and may lead to customer dissatisfaction, which can affect customer loyalty and ultimately hurt the restaurant's profits.

Jamal,Lawson and Kyle Have Been Standing in Line for Almost