Demand Elasticity: 66% Price Elasticity: -11% Using the price elasticity of demand above, if Starbucks decreases...

Demand Elasticity: 66%

Price Elasticity: -11%

Using the price elasticity of demand above, if Starbucks decreases its price by 10 percent, what would happen to the quantity demanded for Starbucks coffee?

Solutions

Expert Solution

E_P = 66% / -11% = -6

We know:

E_P = % change in quantity demanded / % change in price

% change in quantity demanded = E_P * % change in price

= -6 * -10 [Here, -10 means price decreases by 10%]

= 60%

Thus, the quantity demanded for Starbucks coffee increases by 60%.

Rahul Sunny answered 1 year ago

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