Consider the following demand curve for Starbucks coffee. (a) Suppose the current price is $8 per cup. Using elasticity of demand, explain why Starbucks should not increase the price in order to increase total revenue.
(b) Suppose the current price is $2 per cup. Using elasticity of demand, explain why Starbucks should not lower the price in order to increase total revenue.

Question

Consider the following demand curve for Starbucks coffee.  (a) Suppose the current price is $8 per cup. Using elasticity of demand, explain why Starbucks should not increase the price in order to increase total revenue.
(b) Suppose the current price is $2 per cup. Using elasticity of demand, explain why Starbucks should not lower the price in order to increase total revenue.

Quizplus · Accepted Answer

The Answer of Consider the following demand curve for Starbucks coffee.  (a) Suppose the current price is $8 per cup. Using elasticity of demand, explain why Starbucks should not increase the price in order to increase total revenue.
(b) Suppose the current price is $2 per cup. Using elasticity of demand, explain why Starbucks should not lower the price in order to increase total revenue.

Consider the Following Demand Curve for Starbucks Coffee