Restaurant Meals. Student Name Date. “Slowing economy results in lower demand for restaurant services.”. Restaurants get another serving of declining sales
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“Slowing economy results in lower demand for restaurant services.”
Restaurants get another serving of declining sales
About 44% of eateries nationwide reported lower revenue in July, the fourth straight month of leaner business, an industry group said. Owners see more uncertainty in the coming months.
September 02, 2010|By Sharon Bernstein, Los Angeles Times
Nearly half of the nation's restaurants said their business dropped in July as consumers cut back spending in the still-rough economy.
The latest survey from the National Restaurant Assn. rated the outlook for eateries in the coming months to be "uncertain." It was the fourth straight month of decline in the financial performance of restaurants, according to the organization, which polls its membership monthly to determine their sales, plans and outlook.
Because restaurant traffic is so closely linked to the amount of extra money that people have to spend, the poor economy has exacted a particularly heavy toll in the industry, causing shutdowns and layoffs as sales continued to languish over the late spring and early summer, said Hudson Riehle, head of research for the restaurant organization.
As a result, he said, many restaurant owners are pessimistic about when their fortunes will turn around.
"The operator community has become less optimistic about the longer-term outlook for the economy and sales," Riehle said.
About 44% of the nation's restaurant owners said their sales dropped in July, up from 43% in June, according to the survey, which was released this week.
The slump in the economy results in a decrease in demand for restaurant meals
Do restaurant meals have elastic or inelastic demand?
The economic downturn results in a decrease in demand for restaurant meals – most likely due to a decrease in expected future income.
%change in Price:
% change in Quantity:
66% > 44%
Price Elasticity of Demand = 66/40 = 1.65
The % change in quantity demanded is greater than the % change in price resulting in a price elasticity of demand greater than 1…..thus the curve is drawn as an elastic curve.