(1) Suppose the price of coffee beans increases by $0.20 per pound. What is the effect of this raw material price increase on the demand for roasted coffee? If one pound produces 50 cups of coffee, would the price of a cup of coffee rise by $.01? Explain
(2) The article reports that J.M. Smucker Co. plans to increase its coffee prices by 9%.If Smucker has a lot of rivals but has a brand name that has value, will this 9% increase in retail prices imply that profit will rise by 9%?
(3) Is it optimal for a firm to slash prices to retain market share? Is cutting prices during a recession and then raising them in a recovery a good strategy?