What does this tell us about their relationship

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Reference no: EM131240889

Suppose that you own a co?ee shop, and have estimated demand for co?ee as

Q = 80 − 12P + 0.005I + 3Pt − 7Ps

where P is the price of co?ee, I is consumer income, Pt is the price of tea and Ps is the price ofscones. You are selling 100 cups of co?ee for $2 each. Tea costs $5 and scones cost $3 each.

1. What is the own-price elasticity for co?ee? Is co?ee elastic or inelastic?

2. What is the income elasticity for co?ee? What type of good is co?ee?

3. What is the cross-price elasticity between co?ee and tea? What does this tell us about their relationship?

4. What is the cross-price elasticity between co?ee and scones? What does this tell us about their relationship?

Reference no: EM131240889

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