(a) According to Table 4.1, by how much would coffee sales decline if the price of coffee increased 10 percent?

TABLE 4.1 Elasticity Estimates

Degree of Elasticity _______________ Estimate

Relatively elastic (E > 1) ……………………………....

Airline travel, long run ………………………...... 2.4

Fresh fish ……………………………………….......... 2.2

New cars, short run ………………………. 1.2 – 1.5

Unitary elastic (E = 1) ……………………………….....

Private education ……………………………........ 1.1

Radios and televisions ………………………..... 1.2

Shoes …………………………………………............. 0.9

Relatively Inelastic (E < 1) …………………………….

Cigarettes ……………………………………............ 0.4

Coffee ………………………………………............... 0.3

Gasoline, short run …………………………........ 0.2

Long-distance telephone calls ……………….. 0.1

(b) If your local coffee shop raised its coffee prices by the same amount (10 percent), would sales decline by more, less, or the same amount as calculated in part a?