Suppose you ran a restaurant that caters to retired people and you wanted to increase revenue so you increased prices. What is the likely effect of this policy?

A) Total revenue will increase because retired people tend to have inelastic demand for eating out.

B) Total revenue will decrease because retired people tend to have elastic demand for eating out.

C) Total revenue will not change because retired people will pay less in tips.

D) Total revenue will increase because retired people tend to have elastic demand for eating out.

Suppose the government wishes to reduce the amount of sugar consumed by increasing the tax on sugary soda products. At the same time, however, it does not wish to harm low income consumers and offers a once a year cash rebate to low income consumers equal to the taxes paid on sugary products. What is the likely effect of this policy?

A) Low income consumers will purchase less sugary soda products but everyone else will purchase more sugary soda products

B)

Low income consumers may purchase fewer sugary soda products but will not reduce consumption as much as the case with a tax but no cash rebate.

C) No effect on the amount of sugary soda products sold since the income effect works the same way with an increase in income as it does with a price reduction.

D) Consumers will not respond to the tax because sugary soda products are a necessity with no substitutes.