Mike raised the price of his coffee by 15% and the demand for his coffee then fell 25%. If this is the case, then which of the following is true about the demand for Mike's coffee?
A)The demand is perfectly elastic
B)The demand is perfectly inelastic
C)The demand is price elastic
D)The demand is price inelastic

Question

Quizplus · Accepted Answer

In this scenario, the demand for Mike's coffee is price elastic.
Key Takeaway: A change in price-whether an increase or decreases-always affects how much money producers receive for their good and the quantity of the good that is demanded by consumers. How much the demand is affected ultimately depends upon how much the price of the good changes and how much that affects consumers. In general, if the demand for a particular good is price elastic, an increase in the good's price will lead to a decrease in revenue; if the demand for a particular good is price inelastic, then an increase in the good's price will lead to an increase in total revenue.

Mike Raised the Price of His Coffee by 15% and the Demand