Answer to Question #286521 in Economics for Jerum Broncano

Question

1. The initial price of a cup of coffee is Php1, and at the price, 400 cups are demanded. If the price falls to Php0.9, the quantity demanded will increase to 500

a. Calculate the (arc) price elasticity of demand for coffee. Show the solution.

b.Based on your answer to question 1.a., is the demand for coffee elastic or inelastic?

c.Based on your answer to question 1.a., if the price of coffee is increased by 10%, what will happen to the revenues from coffee? Carefully explain how you know.

Answer 1

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