Question

Read Eye on Elasticity at the Coffee Shop on and then explain why the demand for latte is inelastic while the demand for a Starbucks latte is elastic. Which demand is likely to be more inelastic: the demand for latte or the demand for coffee?

Answer 1

Elasticity depend upon three factors

Ie. Price,Income, and The Price Of Substitute and Complementary Goods.

Change in the Price of product, while demand remains the same is called Inelastic Demand.

Demand for Latte is inelastic because lack of substitute.Lack of substitute result in elastic demand for the product.

Change is demand due to change in Price,Income is called Elastic Demand.

While Demand for Starbucks is elastic becuase of number of substitutes available in the market. Ex-If consumer feel that Price of Starbucks is high they can choose another brand ie. Cafe Coffee De.

Latte Demand is lilely to be more inelastic because lack of substitute for latte"s Product.