Question

Owners of the restaurant in A. anticipate that in one year their demand will double as long as they can provide good service to their customers. How much will they have to increase their service capacity to stay out of the critical zone?

Answer 1

To avoid the critical zone when demand doubles due to elastic demand for restaurant meals, the restaurant in question should aim to double its service capacity.

Step-by-step explanation:

The question revolves around a restaurant's service capacity and how it should be adjusted to meet an anticipated doubling of demand. To stay out of the critical zone when demand for restaurant meals is elastic, the restaurant should increase its capacity to match the demand increase. This means if demand doubles, the restaurant should aim to double its service capacity. This could involve various strategies, such as increasing the number of seats, hiring more staff, expanding business hours, or optimizing service workflows to handle more customers without decreasing service quality.

In practical terms, as the demand for restaurant meals is more price-sensitive and elasticity of demand is higher compared to inelastic goods like housing, a significant change in the quantity demanded can occur with price changes. Therefore, a restaurant anticipating such changes in demand should prepare by scaling their service capacity to ensure customer satisfaction and efficient service provision.

Answer 2

The service capacity will be multiplied by two to escape critical zone

Step-by-step explanation:

If they anticipate that the demand for their products will double , and we want to know how much we are going to increase the service capacity in order to stay out of critical zone.

Critical zone is the zone where there is no enough service to render to demand.

So to get the actual amount..we multiply the already Service , let's assume it's x, by the number of times the demand of product will increase.

In this case , it's increasing by two.

The service will be multiplied by two to escape critical zone