2.What is the effect of changes in gasoline prices on the demand for restaurant meals? Is gasoline an economic complement of restaurant meals? Are restaurant meals an economic complement of gasoline?
If gas prices go up, it will hurt quick-service restaurants the most, and in particular those located by major highways. Of course, when gas prices drop, quick-service restaurants see the most benefit. If a chain’s restaurants are in locations that are walkable or close to large residential areas, that presents a distinct advantage if gas prices rise. If you run a quick-service restaurant in a location that requires significant driving to reach, higher gas prices may have more of a negative impact since your customers may not have the financial resources to drive very far.
As gasoline prices rise, the demand for gasoline decreases, following the law of demand. After this decrease in demand for gasoline, people would want to reduce their consumption of gasoline. And since going to a restaurant to have a meal has a cost of travel attached to it which is directly linked with the price of gasoline, people would prefer to not travel and have a home cooked meal instead. Therefore, if price of gasoline rises, demand for restaurant meals falls.
Same logic follows when the price of gasoline falls. As the price of gasoline decreases, the demand for gasoline would increase and so would demand for restaurant meals. This shows that restaurant meals are an economic complement of gasoline.
Thompson, C. (2017, March 8).Rising gas prices are a growing threat to the American way of life. Business Insider. Retrieved January 25, 2022, fromhttps://www.businessinsider.com/how-rising-gas-prices-impact-economy-2017-3