Price of Brazilian Coffee beans 
Brazilian Quantity of Brazilian Coffee beans demanded 

(per pound) 
(pounds) 
(pounds) 
(pounds) 
$4.00 
1,000 
1,000 
2,000 
$3.50 
2,500 
2,500 
5,000 
$3.00 
3,000 
4,000 
7,000 
$2.50 
5,000 
5,000 
10,000 
$2.00 
5,500 
7,000 
12,500 
a. The price elasticity of demand is a term used to refer to the relationships that exists between the price of a product and the quantity demanded at a specified time.
midpoint 
= 
(B2  B1) (B2 + B1)/2 
÷ 
(A2  A1) (A2 + A1)/2 
As such,
midpoint 
= 
(84  70) (84 + 70)/2 
÷ 
(700  600) (600 + 700)/2 

Price elasticity of demand for the berries is 1.18 


b. The monthly average total revenues for year 107 and year 108 are shown in the table below. The slight increase in monthly average total revenue shows that the price elasticity of demand impacted higher on the revenues realized (Hughes, Knittel & Sperling, 2006).
Year (WBCE) 
Monthly barrels of gosum berries demanded 
Price per barrel 
Monthly average total revenue 
107 
700 
$70 
$49,000 
108 
600 
$84 
$50,400 


Change in average total monthly revenue 
$1,400 
c. Based on the positive result on the price elasticity of demand, the above difference could have been predicted as an increase since it implies increased demand and hence higher revenue (Hughes, Knittel, &Sperling, 2006).
a. True. The increase of the Altair chariot price by 20% will result in a decrease in the quantity demanded by 60% due to the price elasticity of 3.
b. False. Increasing the consumers incomes will not directly lead to increased prices but will instead lead to increased demand in the long run.
Part a
midpoint 
= 
(B2  B1) (B2 + B1)/2 
÷ 
(A2  A1) (A2 + A1)/2 
As such,
midpoint 
= 
(20  10) (20 + 10)/2 
÷ 
(900  800) (900 + 800)/2 
The price elasticity of demand after a shift of prices from $10 to $20 is 5.67 which imply a positive elasticity.
Part b
midpoint 
= 
(B2  B1) (B2 + B1)/2 
÷ 
(A2  A1) (A2 + A1)/2 
As such,
midpoint 
= 
(80  70) (80 + 70)/2 
÷ 
(300  200) 200)/2 
The price elasticity of demand after a shift of prices from $70 to $80 is 0.33 which imply a positive elasticity though it has reduced.
Part C: The price elasticity of demand changes along the demand curve because of the changes in the prices of the product when compared to the corresponding demand (Elberse & Eliashberg, 2003).
Marginal utility is the added satisfaction that is derived from consumption of an additional unit of a product or service. With respect to magazines and newspapers, the vending machines are designed in such a way that they offer maximum satisfaction since the product satisfies the same need. However, the sodas and snacks machines are designed to satisfy the specific need of the consumer based on preference and demand (Hughes, Knittel, &Sperling, 2006).
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