Question

2. Suppose the demand for coffee is given by Q(p) = 30 - p, where p...

2. Suppose the demand for coffee is given by Q(p) = 30 - p, where p is the price per cup. If the price per cup is $10, then the price elasticity of demand for coffee is:

Please show all work, step by step

a.

-6.

b.

-1.

c.

-1/2.

d.

-0.55.
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Homework Answers

Answer #1

Option C.

  • Price elasticity of demand refers to the responsiveness of the demand of a good based on the changes in its price.
  • Here as we are not given two different points we use point price elasticity of demand formula.
  • Given the demand function for coffee as :- Q(p) = 30 - P, where P = $10.
  • Substituting the value of P in the demand function, we get Q(p) = 30 - 10 = 20, which is the quantity demanded.
  • Now the point price elasticity of demand can be found easily as follows :-

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