Question

Why is the price elasticity of demand for Starbucks greater than the price elasticity for coffee generally? Explain your answer in at least 3 - 5 sentences with proper spelling, grammar, and punctuation.

Answer 1

Answer:

The price elasticity of a product shows how many percent the requested quantity changes as the price increases by one percent. In the normal case, the elasticity is a negative number, as demand decreases as the price increases; the reverse is extremely unusual.

In the case of large companies, however, the price elasticity of demand is usually much larger. This is so because not only characteristics such as the quality of the product are weighted, but also the brand itself has a value in itself, which sustains the variations in price. Thus, trendy brands such as Starbucks have an established clientele that will not vary due to small price variations. On the other hand, these companies offer a high variety of products, which liquefy said possibility of falling demand, granting greater elasticity.