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Income elasticity of demand

This year was prosperous for the Starbucks Coffee Company. revenues increased 9 percent, excluding the 1035 new retail outlets that were opened. suppose management attributes this revenue growth to a 5 percent increase in the quantity of coffee purchased. if Starbucks's marketing department estimates the income elasticity of demand for its coffee to be 1.75, how will looming fears of a recession (expected to decrease consumer's incomes by 4 percent over the next year) impact the quantity of coffee Starbucks expects to sell?

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Solution Summary

Income elasticity of demand is expressed.

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