Here’s a recipe for long lines, mediocre meals, and surly service at restaurants in Greece:
Officials from the Greek development ministry have been regularly checking menus at dozens of restaurants and cafes and cracking down on overcharging, as Athens readies for the Olympic Games in just over three weeks.
The restaurants and cafes cited had profit margins of between 82 and 588% on some products, well above the state-sanctioned legal limit of 45%.
(This item is from the July 27th edition of USA Today.)
For those of you who’ve studied microeconomic principles, do the following easy exercise. Draw a supply and demand graph. Experiment with different prices – prices above equilibrium, prices below equilibrium, and the price at equilibrium. Then ask: at what price for this good or service is the amount that consumers actually acquire the greatest? That is, what price maximizes the quantity that consumers actually purchase and enjoy?