The initial price of a cup of coffee is $1.5,
and at that price, 200 cups are demanded. If the...

Question

The initial price of a cup of coffee is $1.5,
and at that price, 200 cups are demanded. If the price
falls to $0.90, the quantity demanded will
increase to 350 cups.

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

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

Robert · Accepted Answer

a) Initial price = $1.5 
Final price = $0.90 
Initial quantity demanded = 200 cups 
Final quantity demanded = 350 cups 
Therefore change in price (ΔP) = (1.5 – 0.9) = 0.

The initial price of a cup of coffee is $1.5, and at that price, 200 cups are demanded. If the price falls to $0.90, the quantity demanded will increase to 350 cups. a. Calculate the (arc) price...

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