Answer to Question #184052 in Microeconomics for GLORY JENSON

Question

Why do some restaurants charge very high prices for wine, drinks and bottled water and yet

quite reasonable prices for food?

Answer 1

This is because restaurant owners are not the price takers. A restaurant's main goods or product is foods. Therefore they are selling foods at quite reasonable price. Additionally, wine, drinks and bottled water have an inelastic demand. People can't refuse to drink water because it's price is high. Prices for food is reasonable because demand is elastic.