Starbucks announced today that it is increasing the price of its brewed coffee by 10-20 cents...
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Starbucks announced today that it is increasing the price of its brewed coffee by 10-20 cents a cup, or about 9 percent. A "tall" cup of java will now cost $1.95 to $2.15 in Starbucks' 8,000 U.S. locations. The company said the price increase was justified by rising costs, including rent and labor. Analysts predicted that the price hike wouldn't deter most consumers, as company loyalty is extremely high. Whatever sales might be lost for price-sensitive customers would be more than offset by higher revenues from loyal customers. The company's stock rose after the announcement. Source: News accounts of June 7-9, 2018. According to the News Wire, a. By what percent did Starbucks raise brewed coffee prices? 9% b. If unit sales didn't decline at all, what would the price elasticity of demand have been? 0 Now suppose unit sales fell by 2 percent after this price increase. c. Calculate price elasticity of demand. Instructions: Enter your response using absolute value. d. In the case presented in part c, demand was inelastic e. In the case presented in part c, total revenue would have increased Starbucks announced today that it is increasing the price of its brewed coffee by 10-20 cents a cup, or about 9 percent. A "tall" cup of java will now cost $1.95 to $2.15 in Starbucks' 8,000 U.S. locations. The company said the price increase was justified by rising costs, including rent and labor. Analysts predicted that the price hike wouldn't deter most consumers, as company loyalty is extremely high. Whatever sales might be lost for price-sensitive customers would be more than offset by higher revenues from loyal customers. The company's stock rose after the announcement. Source: News accounts of June 7-9, 2018. According to the News Wire, a. By what percent did Starbucks raise brewed coffee prices? 9% b. If unit sales didn't decline at all, what would the price elasticity of demand have been? 0 Now suppose unit sales fell by 2 percent after this price increase. c. Calculate price elasticity of demand. Instructions: Enter your response using absolute value. d. In the case presented in part c, demand was inelastic e. In the case presented in part c, total revenue would have increased
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