Read Eye on Elasticity at the Coffee Shop on p. 125 then use the following data about Elle’s Espresso Bar to work. When Elle’s Espresso Bar increased its prices by 10 percent, the quantity of coffee that Elle’s sold fell by 40 percent. When Elle’s and its competitors cut their prices by 10 percent, the quantity of coffee sold by Elle’s increased by only 4 percent.

Explain the difference between the responses to Elle’s price hike and price cut. Why did the price increase bring a large response in the quantity sold while the price cut had only a small effect?