After two years in the Smith School, you decide to open a Starbuck's Coffee in College Park. Your business does very well for the first year as you have average sales of 1,000 cups of coffee a day for $2 per cup. However, "Smoothie King" lowered the price of its Smoothie King smoothies from $3 to $2 and, one month later, "Java Head Caf" lowered the price of its coffee from $2 to $1. Now you are only selling 500 cups of coffee a day

a.If the cross-price elasticity of Starbuck's coffee relative to price changes in Smoothie King smoothies is 0.5, what is the cross-price elasticity of Starbuck's coffee relative to price changes in Java Head Caf coffee?

b. Which of your competitors' moves has more of an impact on your sales?Why?

c. Youthendecideto startofferingStarbuck'ssmoothiestodiversifyyourlineof businessandcompete"headon"with"SmoothieKing."What would you expect to happen to your coffee sales?Why?