ZuoTi.Pro
Question

12. A cup of Starbucks coffee is just as good as a cup of Dunkin Donuts...

12. A cup of Starbucks coffee is just as good as a cup of Dunkin Donuts coffee for me (assuming equal sized cups.) The price of coffee at Starbucks used to be $2.50 compared to $2 at Dunkin Donuts. The price of Starbucks coffee increased. What will happen to my new utility compare to my utility before, after this price increase? With my income, m, what is my demand function for Starbucks? What about Dunkin Donuts?

business   economics   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

As both are perfect substitute goods ( because a  cup of Starbucks coffee is just as good as a cup of Dunkin Donuts coffee).

The consumer will buy that coffee whose price is less and so he will consume only Dunkin donuts' coffee.

So even when the price of Starbucks coffee increases the utility remain same because the consumer will only buy Dunkin donuts coffee.

With Income m,

Demand function for Starbucks = 0

Demand function for Dunkin Donuts = m/2

( because demand function in perfect substitutes = M / Price of product).

0 0
Add a comment
Know the answer?
Add Answer to:
12. A cup of Starbucks coffee is just as good as a cup of Dunkin Donuts...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • Marketing Planning Helps Dunkin’ Donuts Score Big in Coffee Customer Loyalty A key goal for a...

    Marketing Planning Helps Dunkin’ Donuts Score Big in Coffee Customer Loyalty A key goal for a marketing manager is to make sure that the company’s brand stays relevant. Successfully realizing this goal requires a marketing planning process that is both thorough and grounded in best practices, and also flexible enough to allow the firm to react to (and hopefully stay ahead of) changing customer preferences and shifts in values. Over its 67 years in business, Dunkin’ Donuts has shown that...

  • Marketing Planning Helps Dunkin’ Donuts Score Big in Coffee Customer Loyalty A key goal for a...

    Marketing Planning Helps Dunkin’ Donuts Score Big in Coffee Customer Loyalty A key goal for a marketing manager is to make sure that the company’s brand stays relevant. Successfully realizing this goal requires a marketing planning process that is both thorough and grounded in best practices, and also flexible enough to allow the firm to react to (and hopefully stay ahead of) changing customer preferences and shifts in values. Over its 67 years in business, Dunkin’ Donuts has shown that...

  • 6. (10 pts.; 2 pts each) You are the manager for Dunkin Donuts and know the following elasticities: η,-1.2 nay 0.5 n is...

    6. (10 pts.; 2 pts each) You are the manager for Dunkin Donuts and know the following elasticities: η,-1.2 nay 0.5 n is the price elasticity of demand for Dunkin Donuts (DD) glazed doughnuts, nsya is the cross elasticity of demand between DD glazed doughnuts and Krispy Kreme (KK) glazed doughnuts, ney2 is the cross elasticity of demand between DD glazed doughnuts and DD French Vanilla coffee, and n, is the income elasticity of DD glazed doughnuts. a) If you...

  • Assume the price of a cup of coffee is $0.50, the price of a cupcake is...

    Assume the price of a cup of coffee is $0.50, the price of a cupcake is $0.50 and the individual has a budget of $1.50. Assuming they maximize their utility, how many of each good will they purchase? Number of coffee cups Total utility Number of cupcakes Total Utility 1 20 1 25 2 35 2 45 3 47 3 59 4 57 4 65 5 63 5 67 Question 15 options: 4 cups of coffee and 2 cupcakes 1...

  • Heavenly Donuts increases the price of its regular coffee from $2.00 to $2.35 per cup. As...

    Heavenly Donuts increases the price of its regular coffee from $2.00 to $2.35 per cup. As a result, Heavenly Donuts now sells 350 cups per day instead of 400 cups per day. Calculate the Price Elasticity of Demand. Show all of your work. Explain your answer. Prove your answer with the Total Revenue test and show all of your work 1. 2. If AMC Theaters increases the price of a large bucket of popcorn by 20% and the quantity demanded...

  • 3. Suppose that there is a bumper crop of coffee across the world, where more coffee...

    3. Suppose that there is a bumper crop of coffee across the world, where more coffee than is expected is produced. As a result, Starbucks at LSU lowers the price for a cup of coffee from $2.70 to $2.00. Several days after the price change, the number of cups of coffee sold in a day has increased from 3,000 to 4,125. What is the elasticity of demand at this time scale? Is demand elastic or inelastic? If prices stay the...

  • Income and Starbucks Coffee Shops. Starbucks just hired you to determine whether your city could support...

    Income and Starbucks Coffee Shops. Starbucks just hired you to determine whether your city could support a new Starbucks coffee shop. There are currently four Starbucks coffee shops in the city, and each has just enough customers to survive. The average household income in the city is expected to increase by 10 percent per year for the next 20 years. Suppose the income elasticity for Starbucks coffee products is 1.25 and the population is assumed to be constant. a. By...

  • Farkas spends $350 each week on cups of lattes and a composite good. Lattes cost $2.50/cup...

    Farkas spends $350 each week on cups of lattes and a composite good. Lattes cost $2.50/cup and the composite good cost $1/unit. Assume Farkas cannot borrow any money. What is the opportunity cost of an additional unit of the composite good in terms of cups of lattes? (lf necessary, round to three decimals.) Suppose the price of lattes increased to $3.00/cup. What is the opportunity cost of an additional unit of the composite good in terms of cups of lattes?...

  • Chapter 5 Problem and Applications 1. Suppose the price elasticity of demand for heating oil is...

    Chapter 5 Problem and Applications 1. Suppose the price elasticity of demand for heating oil is 0.2 in the short run and 0.7 in the long run. a. If the price of heating oil rises from $1.80 to $2.20 per gallon, what happens to the quantity of heating oil demanded in the short run? In the long run? (Use the midpoint method in your calculations.) b. Why might this elasticity depend on the time horizon? Cups of coffee and donuts...

  • In the spring of 2009, an article from Bloomberg News summed up the situation that Starbucks was ...

    In the spring of 2009, an article from Bloomberg News summed up the situation that Starbucks was in: “After more than a decade of sensational buzz, Starbucks is struggling nationwide as it faces slowing sales growth and increased competition.” The initial success and later struggles of Starbucks are a familiar pattern for firms in monopolistically competitive markets. When Starbucks began rapidly expanding, CEO Howard Schultz knew that fresh-brewed coffee was widely available in restaurants, diners, and donut shops. He believed,...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT