Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
The demand for premium coffee is elastic, meaning consumers are very responsive to price changes.
B
The coffee shop is in a monopolistic market, and lowering prices always increases revenue regardless of demand elasticity.
C
Lowering the price of premium coffee attracts customers who were previously indifferent to price, thus increasing revenue.
D
The total revenue increase is due to a higher volume of customers, not the elasticity of demand.
Understanding the Answer
Let's break down why this is correct
Answer
When the coffee shop lowered the price of its premium coffee, it experienced a significant increase in sales. This happens because the demand for this coffee is elastic, meaning that customers are sensitive to price changes. When the price dropped from $4. 50 to $3. 50, more people were willing to buy the coffee, which increased the total number of cups sold.
Detailed Explanation
When the price goes down, more people want to buy the coffee. Other options are incorrect because Some might think that lowering prices always helps sales in a monopolistic market; This suggests that lowering the price only brings in new customers who didn't care about the price before.
Key Concepts
Price Elasticity of Demand
Total Revenue
Monopolistic Competition
Topic
Price Elasticity and Revenue
Difficulty
medium level question
Cognitive Level
understand
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