When the Price of Coffee Decreases 5%, Quantity Demanded Increases

question 173

Multiple Choice

When the price of coffee decreases 5%, quantity demanded increases 5%. The price elasticity of demand for coffee is ________ and total revenue from coffee sales will ________.

• A) elastic; decrease
• B) elastic; increase
• C) inelastic; decrease
• D) unit elastic; not change

Recognize the relationship between income, price changes, and consumer's ability to afford preferred bundles.

Grasp the concept of producer's surplus and its relation to supply and demand.

Analyze the impact of price discounts and club memberships on consumers' welfare and surplus.

Understand the implications of quasilinear preferences on consumer surplus and compensating variations.

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Definitions:

Marginal Revenue

The financial gain realized from the sale of one more unit of a good or service.

Cheese

A food item made from milk by thickening the milk protein casein, available in various flavors, textures, and shapes.

Marginal Revenue

The additional income that is generated by increasing sales of a product or service by one unit.

Prices

The amount of money required to purchase a good or service, set by supply and demand dynamics in a market.