Suppose you are the manager of a local water company, and you are ...

[CORALGRILL2014]

Suppose you are the manager of a local water company, and you are instructed to get consumers to reduce their water consumption by 10 percent. If the price elasticity of demand for water is 0.25, by how much would you have to raise the price of water?
 a. 10 percent
  b. 25 percent
  c. 40 percent
  d. 100 percent

Question 2

Suppose that Starbucks reduces the price of its premium coffee from 2.20 to 1.80 per cup, and as a result, the quantity sold per day increased from 350 to 450 . Over this price range, the price elasticity of demand for Starbucks coffee is:
 a. 0.40.
  b. 0.80.
  c. 1.25.
  d. 2.50.

[Eunice618]

Answer to Question 1

c

Answer to Question 2

c