What is the expected percent change in consumer demand

Reference no: EM13239685

Researchers Siegfried and Zardoshty estimated the following for coffee:

the cross price elasticity of demand between coffee and the price of tea is 0.15 (estimates the relationship between the demand for coffee and the price of tea)

the price elasticity of demand for coffee is -0.16

the income elasticity of demand for coffee is +0.51

a. Which of the following term(s) apply to coffee, based on the elasticity information above: normal, inferior, luxury, necessity, elastic, inelastic, unit elastic? Identify all that apply and justify your answer using the elasticity information.

b. If coffee price increases by 2.7%, what is the expected percent change in consumer demand (assuming there are no other changes that would affect demand for coffee)? What is the expected change in revenue derived from coffee sales?

c. If consumer income decreases by 3.2%, what is the expected percent change in consumer demand (assuming there are no other changes that would affect demand for coffee - no price changes)?

d. If coffee price increases by 2.7% and consumer income decreases by 3.2%, what is the expected change in revenue derived from coffee sales?

e. For the purposes of this next question, disregard parts b-d of this problem. Suppose that the price of tea has risen by 3.5%. Coffee producers are considering matching that price increase (increasing coffee prices by 3.5%). If the coffee producers want to earn as much revenue as possible, should they leave coffee prices unchanged or match the price increase in tea?

Reference no: EM13239685

Questions Cloud

Determine the ratio of this gravitational force : The centers of a 15kg lead ball and a 50g lead ball are separated by 10cm, What is the ratio of this gravitational force to the weight of the 50g ball

Why should purchase the extended warranty : This would cover years 4 and 5, after the manufacturer's warranty has expired. Suppose that the expected repair costs for years 4 and 5 are $850 per year. If your discount rate is 5.5% per year, should you purchase the extended warranty.

Find the mass of the planet and star : You are the science officer on a visit to a distant solar system. Prior to landing on a planet you measure its diameter to be 1.8x10^7m and its rotation period to be 22.3 hours, find the mass of the planet and star

Compute the molar concentration required to obtain : For a protein w/ a molar mass of 1x10 6 u, calculate the molar concentration required to obtain an osmotic pressure of 10 matm at 25 degrees C

What is the expected percent change in consumer demand : If consumer income decreases by 3.2%, what is the expected percent change in consumer demand (assuming there are no other changes that would affect demand for coffee - no price changes)

Explain electrons can be described by the quantum numbers : How many electrons can be described by the quantum numbers n=7 and l=2? the answer is 10, why is this

Find the ratio of the electric force : A 0.10g honeybee acquires a charge of 25pCwhile flying, What is the ratio of the electric force on the bee to the bee's weight

Determine the free-fall acceleration : What is the free-fall acceleration toward the sun at the distance of the earth's orbit? [The mean distance the earth is from the sun in its orbit is 1.50x10^11 m

How to continue producing at the current output level : A firm is currently producing in the elastic portion of its demand curve. What course of action do you recommend for it assuming it wants to raise revenue Continue producing at the current output level

User Account

All Pages