Suppose That a Coffee Shop Faces a Demand Curve That

question 18

Multiple Choice

Suppose that a coffee shop faces a demand curve that is liner and that the current price for its cup of coffee is set at a point where the price elasticity is 1.2.If the local dry cleaner shop increases the price per garment:

• A)the demand becomes more elastic and the total revenue decreases.
• B)the demand becomes less elastic and the total revenue decreases.
• C)the demand becomes less elastic and the total revenue increases.
• D)the demand becomes more elastic and the total revenue increases.

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Definitions:

Interest Rate

The percentage of a sum of money charged for its use, often expressed as an annual percentage rate.

Pro Forma Statements

Financial statements that project the future financial position of a company, based on current data and assumptions about future activity.

Payout Ratio

The proportion of earnings paid out as dividends to shareholders, often expressed as a percentage of the company's total net income.

Short-term Debt

Financial obligations that are due to be paid within one year, often used as part of a company's operational financing strategy.