Question

When​ Elle's Espresso Bar raised its price by 10​ percent, the quantity of coffee that Elle sold decreased by 40 percent. When Elle and all her competitors cut their prices by 10​ percent, the quantity of coffee sold by Elle increased by only 4 percent. Explain the difference between the responses to​ Elle's price hike and the price cut. Why did the price increase bring a large response in the quantity sold while the price cut had only a small​ effect?

A. The change in the quantity demanded is always larger with a price hike than with a price cut.
B. With a price hike the demand for Elle's coffee is inelastic, but with a price cut the demand for Elle's coffee is elastic.
C. Elle's coffee has lots of dose substitutes while coffee has few substitutes, so the demand for Elle's coffee is more inelastic than the market demand for coffee.
D. Elle's coffee has lots of dose substitutes while coffee has few substitutes, so the demand for Elle's coffee is more elastic than the market demand for coffee.

Answer 1

Answer: Elle's coffee has lots of close substitutes while coffee has few substitutes, so the demand for Elle's coffee is more elastic than the market demand for coffee.

Here, it can be seen that when Elle's Espresso Bar raised its price by 10​ percent, the quantity of coffee that Elle sold decreased by 40 percent, whereas when Elle and all her competitors cut their prices by 10​ percent, the quantity of coffee sold by Elle increased by only 4 percent.

∴ The demand for Elle's coffee is more elastic than the market demand for coffee.

Answer 2

D. Elle's coffee has lots of dose substitutes while coffee has few substitutes, so the demand for Elle's coffee is more elastic than the market demand for coffee

Step-by-step explanation:

When​ Elle's Espresso Bar raised its price by 10​ percent, the quantity of coffee that Elle sold decreased by 40 percent. When Elle and all her competitors cut their prices by 10​ percent, the quantity of coffee sold by Elle increased by only 4 percent. Explain the difference between the responses to​ Elle's price hike and the price cut. Why did the price increase bring a large response in the quantity sold while the price cut had only a small​ effect?

D. Elle's coffee has lots of dose substitutes while coffee has few substitutes, so the demand for Elle's coffee is more elastic than the market demand for coffee

it is D because

It can be seen that the demand is more elastic. This when the percentage change in quantity demanded for a particular goods is greater than the percentage change in price