Suppose that a coffee shop faces a demand curve that is liner and that the current price for its cup of coffee is set at a point where the price elasticity is 1.2.If the local dry cleaner shop increases the price per garment,demand becomes ________ elastic and total revenue ________.
A) more; decreases
B) more; increases
C) less; increases
D) less; decreases

Question

Quizplus · Accepted Answer

If the local dry cleaner shop increases the price per garment, the demand for coffee will become more elastic. This means that a small increase in price will lead to a larger decrease in the quantity demanded. As a result, the coffee shop's total revenue will decrease. This is because the increase in the price of garments reduces consumers' disposable income, which means that they have less money to spend on coffee. In addition, since the demand for coffee is now more elastic, consumers are more likely to switch to substitutes or reduce their consumption of coffee in response to the price increase.

Suppose That a Coffee Shop Faces a Demand Curve That