exam #1 - september 17 - requires respondus lockdown browser van schaefer submitted sep 17 at 8:46pm…

exam #1 - september 17 - requires respondus lockdown browser van schaefer submitted sep 17 at 8:46pm question 28 0 / 1 pts dexter morgan starts each day with a cup of coffee from his favorite miami café before heading to work at the forensics lab. one day, the café raises the price of a medium coffee from $3.00 to $3.60, a 20% increase, due to rising demand for coffee. the price elasticity of demand for coffee at this café is -1.5, and the price elasticity of supply is 0.8. by what percentage has the demand for coffee changed, as evidenced by the price increase? 46% -46% 16% 30%

exam #1 - september 17 - requires respondus lockdown browser van schaefer submitted sep 17 at 8:46pm question 28 0 / 1 pts dexter morgan starts each day with a cup of coffee from his favorite miami café before heading to work at the forensics lab. one day, the café raises the price of a medium coffee from $3.00 to $3.60, a 20% increase, due to rising demand for coffee. the price elasticity of demand for coffee at this café is -1.5, and the price elasticity of supply is 0.8. by what percentage has the demand for coffee changed, as evidenced by the price increase? 46% -46% 16% 30%

Answer

Explanation:

Step1: Recall price - elasticity of demand formula

The formula for price - elasticity of demand ($E_d$) is $E_d=\frac{%\text{ change in quantity demanded}}{%\text{ change in price}}$.

Step2: Rearrange the formula to solve for % change in quantity demanded

We know that $E_d = - 1.5$ and $%\text{ change in price}=20%=0.2$. Rearranging the formula gives $%\text{ change in quantity demanded}=E_d\times%\text{ change in price}$.

Step3: Calculate the % change in quantity demanded

Substitute the values into the formula: $%\text{ change in quantity demanded}=-1.5\times0.2=-0.3 = - 30%$.

Answer:

-30%