Price Elasticity: Consumption, Factors and Price Changes at Starbuck's

             Basic economic principles explain the idea that if the price of a
             product rises, consumers will purchase less of the product. However there
             are some items which do not seem to fit into this principle (National
             Council on Economic Education, 2003). This is caused by the price
             elasticity of the product in question.
             Price elasticity of demand can be thought of as a measure of demand
             for a product in relation to price change. It is a question of whether or
             not sales for a particular item drop if the price rises, or if, in fact,
             the quantity of the item we purchase drops when prices rise. If price
             increases lower the sales of a product, the product is price elastic. If
             price increases do not affect the purchasing of a good, the product is
             price inelastic (National Council on Economic Education, 2003).
             Starbuck's gourmet coffee is an example of a price inelastic product.
             Studies have shown that the average estimated price elasticity for coffee
             is around .25 (Gwartney & Stroup, 2003). The calculation for price
             elasticity of demand is the percent change in quantity demanded of a
             product divided by the percentage change in price. To find the percentage
             of change, the amount of the change is divided by the beginning amount
             (National Council on Economic Education, 2003). Since 1.0 is a standard
             price elasticity, a good with a lower than 1.0 score is said to be
             inelastic. The closer the score is to 0, the more inelastic the product is
             Since Starbuck's gourmet coffee is a relatively inelastic product, one
             can predict the impact of raising or lowering the price of this product.
             Generally speaking, any increase in price will not dramatically alter the
             demand or quantity purchased for the product. Similarly, lowering the
             price of the product will also not drastically reduce the number of items
             There are five main determinants of price elasticity, a
             ...

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Price Elasticity: Consumption, Factors and Price Changes at Starbuck's. (1969, December 31). In MegaEssays.com. Retrieved 08:03, March 28, 2024, from https://www.megaessays.com/viewpaper/201737.html