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According to the source, the elasticity of coffee demand is about 0.3. What does a 10 percent rise in the price of coffee do to the quantity of coffee consumed?
AIt stays exactly the same
BIt declines by about 3 percent
CIt declines by about 30 percent
DIt rises by about 3 percent
Answer & Solution
Correct answer: B. It declines by about 3 percent
1. Elasticity of 0.3 means quantity responds by about 0.3 times the percentage change in price.
2. A 10 percent rise in price times 0.3 gives roughly a 3 percent decline in quantity consumed.
3. This directly for coffee demand.
4. A 30 percent decline would only match an elasticity of about 3, far higher than the stated 0.3.
_Source: OpenStax Principles of Microeconomics for AP Courses (CC BY 4.0), Ch 5 "Elasticity", section 5.3 | Elasticity and Pricing_
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