1.

All-you-can-eatrestaurantsallowcustomerstoeatasmuchastheywantforafixedprice. These types of restaurants must make money, or they would not remain in business. How can they earn profits when people can always eat more which would increase the restaurant's costs as they eat more? What principle are the restaurants relying on? How does this work?

2.

In local market,thepriceofproductXdecreasesfrom$20to$12,and the total quantity of sales increases from 100,000 to 225,000.

A. Using the price elasticity of demand formula for calculating elasticity, what is the price elasticity of demand for product X?

B. Is the demand elastic, unit-elastic or inelastic? C. What is the change in revenue for this product from the price decrease?