The current price of coffee at a diner is 1.00 per cup. Danny learns that the...
The current price of coffee at a diner is 1.00 per cup. Danny learns that the own price elasticity of demand for coffee is -2. if Danny wants to see sells increase by 10% what new price should be for coffee?
Homework Answers
Elasticity of demand = % CHange in Quantity/%Change in Price
-2= 10/%Change in Price
%Change in Price = -10/2 = -5%
This means that the quantity demanded will increase by 10 percent due to a fall in price by 5%
If current price is 1 per cup, it will become 0.95
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