Question

You've just learned that tuition and fees for the next semester are expected to increase by 15%. How do you think this will impact demand for Moondogs Coffee?

Answer 1

The demand for the coffee will decrease with the rise in the fee because of decrease in the money in hand of the student.

Explanation:

Demand of a particular product is related to many factors. Some of the factors affecting the demand of a good are price of the good, income of the consumers, taste, fashion, availability of substitutes and so on.

In the above given example, since with the rise in the tuition and the fee of the student, the money in the hand of the student decreases, so he will have less money to spend. Therefore the demand of the coffee will also decrease with this increase.