1. When OrangeCoffee changed the price of a small brewed coffee from $1.95 to $2.05, it expects that customers will no longer demand 500 cups but 480 instead. This is a decrease in quantity demanded of 4% and an increase in price of 5%. What is the value of price elasticity when this change is made?
2. Is demand inelastic or elastic between these two points? How can you tell?
3. Total revenue is equal to quantity multiplied by price. What was the revenue when 500 cups were sold for $1.95 each? What was the revenue when 480 cups are sold for $2.05 each?
4. Did OrangeCoffee gain or lose from this price increase? How can you tell?