Suppose that in October the price of a cup of cafe latte was $1.50 and 400 lattes were consumed. In November the price of a latte was $2.00 and 200 lattes were consumed. What might have caused this change?

Question

Quizplus · Accepted Answer

The increase in the price of a latte and decrease in quantity consumed suggests that the cost of producing lattes has increased, which in turn may be due to an increase in the cost of coffee beans (an input in production). A rise in the price of tea or a fall in its price (option A and D) wouldn't directly affect the demand for lattes, and hence, is an unlikely cause for the change observed.

Suppose That in October the Price of a Cup of Cafe