(a) Your daily cuppa may soon cost more BAYAMON - Coffee masters have a problem. The cost of the beans that they import has soared this year, leaving roasters anguishing over whether their customers, from grocery stores to cafes to people looking for their daily latte, will tolerate higher prices. Extreme weather has damaged crops in Brazil, the world's largest coffee exporter. On top of pandemicrelated shipping bottlenecks, political protests that stalled exports from Colombia had pushed the cost of beans up nearly 43 per cent this year. Mr Henry, a coowner of Campfire Coffee in Tacoma, might have to raise prices or cut costs somewhere else, such as using cheaper supplies to roast coffee. If he does decide to charge more than the current US$4.39 (S $5.95) for his 12ounce lattes, he said, he needs a price that "won't scare people off" as the economy recovers. "We're still in a stage in the pandemic where people are price-sensitive," he said. Adapted ow The Straits Tunes, 15 August 2020 (b) The following table illustrates the changes in the percentage share of personal consumption expenditures (PCE) of Americans from 2019 to 2020, when average income fell. The share of spending on goods in nominal PCE increased in 2020 at the expense of services Shares in nominal PCE Durable goods Nondurable goods Services 2019 69.0 20.5 10.5 2020 67.1 21.5 11.4 Sources: United States Department of Commerce (sourced through Haver Analytics); Deloitte Services LP economic analysis. Deloitte Insights | deloitte.com/insights Based on information in the chart, use the concept of income elasticity of demand to identify the type of good that (i) durable goods, (ii) non-durable goods and (iii) services belong to respectively. Justify your answers. (6 marks)(ii) (iii) Use information from the passage above to explain the possible increase in the price of a cup of coffee, Use a demand and supply diagram to aid your explanation. (4 marks) Using information from the passage, determine if the demand for a cup of coffee is price elastic or price inelastic. Use a relevant factor of price elasticity of demand to support your answer. (4 marks) Based on your answer to part (ii), suggest if Mr Henry should increase the price of a cup of coffee. Use a diagram to explain and support your answer. (6 marks)