What happens to the demand curve facing a Starbucks shop when a Dunkin' Donuts store opens...

What happens to the demand curve facing a Starbucks shop when a Dunkin' Donuts store opens next to it? What can Starbucks do to maintain its business?

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Expert Solution

Ans) Dunkin donuts and Starbucks are substitutes by nature. When Dunkin donuts opens the store next to Starbucks, demand for Starbucks will decrease due to increased competition. Demand curve for Starbucks will shift inwards i.e to the left.

Since demand for Starbucks is elastic, it can try giving some discounts or offers, like, buy one get one free etc. to lure the customers.

Rahul Sunny answered 1 year ago

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