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Answer to Question #74368 in Economics of Enterprise for veronica

Question #74368
law of demand:
1. EJ'S restaurant wanted to increase its lunch business. The owners distributed coupons good for $1 off every lunch order, Business increased by 25 percent. It is: ____ Because:____
2. American Eagle clothing store has a successful two for the price of one sale. THe owners next tried three for the price of one sale on remaining clothes. This sale was not nearly as successful. It is:___ Because:____
Expert's answer
1. Restaurant EJ wanted to increase lunch business. Owners distributed coupons for $ 1 per dinner, business increased by 25 percent. It is: income effect. Because: with the decrease in the price of lunch, the demand curve will change the angle of inclination, become more steep, and the equilibrium point of the market will shrink, so the value of demand increased with decreasing prices.
2. American Eagle clothing store has a successful two for the price of one sale. THe owners next tried three for the price of one sale on remaining clothes. This sale was not nearly as successful. It is: replacement effect. Because: with the decrease in the price of lunch, the supply curve will change the angle of inclination, become more steep, and the equilibrium point of the market will shrink.

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