Question

Suppose that when the price of a 16 oz. to-go cup of gourmet coffee is $4.25, students purchase 750 cups per day. If the price decreases to $3.75 per cup, which of the following is the most likely outcome?a. students would purchase fewer than 750 cups per day. b. student would continue to purchase 750 cups per day. c. students would purchase more than 750 cups per day. d. we do not have enough information to answer this question

Answer 1

Answer:

c. students would purchase more than 750 cups per day.

Explanation:

As per the law of demand, an inverse relationship exists between price of a good and it's demand. If price of a good falls, keeping other factors affecting demand as constant, the quantity demanded of the good shall rise.

In the given case, quantity demanded of coffee is 750 cups per day at the price level of $4.25 per cup. When price falls to $3.75 per cup, the demand for coffee shall now rise. So ideally, more than 750 cups shall be purchased by students now.