Question

When​ Elle's Espresso Bar increased 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.
The price elasticity of demand for​ Elle's Espresso Bar coffee is
nothing.

Answer 1

4

Step-by-step explanation:

Price elasticity of demand measures the responsiveness of quantity demanded to changes in price of the good.

Price elasticity of demand = percentage change in quantity demanded / percentage change in price

40 / 10 = 4

If the absolute value of price elasticity is greater than one, it means demand is elastic. Elastic demand means that quantity demanded is sensitive to price changes.

Demand is inelastic if a small change in price has little or no effect on quantity demanded. The absolute value of elasticity would be less than one

Demand is unit elastic if a small change in price has an equal and proportionate effect on quantity demanded.

Infinitely elastic demand is perfectly elastic demand. Demand falls to zero when price increases

Perfectly inelastic demand is demand where there is no change in the quantity demanded regardless of changes in price.