The own-price elasticity of Starbucks coffee is -0.8, meaning __.

Question

BlackTom AI · Accepted Answer

To analyze the statement, start by unpacking what own-price elasticity of demand means: it measures the percentage change in quantity demanded in response to a 1% change in the good's price, holding other factors constant.
Option 1: '1% increase in Starbucks coffee’s price decreases the demand of Starbucks coffee by 8%' This would imply an elasticity of -8, which is far more elastic than -0.8. The magnitude here is too large for the given value.
Option 2: '1% increase in Starbucks coffee’s price increases the demand of Starbucks coffee by 8%' This suggests a positive elasticity of +8, meaning quantity demanded rises when price rises, which contradicts the negative sign of a typical downward-sloping demand curve and the stated -0.8.
Option 3: '1% increase in Starbucks coffee’s price decreases the demand of Starbucks coffee by 0.8%' This matches the definition of an elasticity of -0.8: a 1% price rise leads to a 0.8% fall in quantity demanded.
Option 4: '1% increase in Starbucks coffee’s price increases the demand of Starbucks coffee by 0.8%' This again indicates a positive relationship between price and quantity demanded, inconsistent with the usual downward slope and with a negative elasticity value.
Putting it together, the only option that aligns with an elasticity of -0.8 is the one that shows a 1% price increase causing a 0.8% decrease in quantity demanded. The alternatives either overstate the responsiveness, flip the sign, or imply a positive relationship that contradicts demand theory.

MKTG1021.07|.08|.09 Fall 2025 Marketing Principles [Wang] MKTG1021-Final Exam- Requires Respondus LockDown Browser

The own-price elasticity of Starbucks coffee is -0.8, meaning __.

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