You are advising a coffee shop manager who wants to estimate how much sales will change if

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You are advising a coffee shop manager who wants to estimate how much sales will change if the price of a latte rises. You tell him that he should measure the change in sales using the percentage change in quantity of coffee sold rather than the number of cups of coffee or the total ounces of coffee sold. Similarly, you tell him that he should measure the price increase in percentage terms rather than in terms of absolute dollars. Explain why he should measure elasticity in percentage terms rather than in terms of dollars and cups.

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Microeconomics

ISBN: 978-1259813337

2nd edition

Authors: Dean S. Karlan, Jonathan J. Morduch

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