Explore BrainMass

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?

© BrainMass Inc. brainmass.com July 19, 2018, 1:42 pm ad1c9bdddf

Solution Summary

Income elasticity of demand is expressed.