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Having problems with this problem. Any help would be appreciated.?
Suppose the price of coffee beans increases by $0.20 per pound. What is the effect of this raw material price increase on the demand for roasted coffee? If one pound produces 50 cups of coffee, would the price of a cup of coffee rise by $0.01?Explain.
1 Antwort
- Anonymvor 6 Jahren
It is a matter of cost, not price.
Think about it: if the cost of making a cup of coffee rises by one-cent, would you change the price to the customer? Probably not.
But the cost calculation goes like this:
Beans increase in cost by 20 cents per pound.
That increase will be shared between 50 cups of coffee.
So 20/50 cents per cup will be the increase in cost.
That is 0.4 cent per cup.
That is $0.004 per cup in dollars.
Would you raise the price of a cup of coffee by this amount?
Neither would I.