Question

You are planning to open a new Italian restaurant in your hometown where there are three other Italian restaurants. You plan to distinguish your restaurant from your competitors by offering northern Italian cuisine and using locally grown organic produce. What is likely to happen in the restaurant market in your hometown after you​ open?

Answer 1

Answer:

C) The demand curve facing each restaurant owner becomes more elastic.

Explanation:

Evidently, the competition increases when a new player enters the market. By entering the market with a new, specialized restaurant, the demand curve of each restaurant becomes more elastic. That is because consumers have more restaurants to compare the price, so they can go for the most convenient. When that happens, the demand is more sensitive to price change.