Question

If Starbuck's marketing department estimates the income elasticity of demand for its coffee to be 1.55
a. How will looming fears of a recession (expected to decrease consumers' income by 4% over the next year) impact the quantity of coffee Starbucks expects to sell? 
b. For the first time in two years big g raised cereal prices by 2% if as a result of this price increase, the volume of all cereal sold by big g dropped by 3% what can you infer about the own price elasticity of demand for big g cereal? Can you predict whether revenues on sales of its lucky charms brand increased or decreased/ explain.



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  • CreatedAugust 05, 2013
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