ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Coffee is generally widely available at a level of quality that meets the needs of most buyers. The combination of a low price, relative to the buyer’s spending power, and the fact that the product is sold by many different suppliers in a competitive market, make the demand highly elastic.

Detailed explanation-2: -Inelastic demand patterns make hot beverages different At a global level, coffee displays a one-year price elasticity of-0.26 (meaning that a 1% increase in price will, all else being equal, be expected to result in a loss of 0.26 percentage points from previous volume growth projections).

Detailed explanation-3: -Coffee has an inelastic price elasticity due to supply elasticity of supply (PES). Because the time period influences PES, it can be difficult to change the coffee supply in the short term, as prices rise.

Detailed explanation-4: -In general, necessities and medical treatments tend to be inelastic, while luxury goods tend to be most elastic.

Detailed explanation-5: -Many consumers have a very inelastic demand for coffee. This is because there are few close alternatives to coffee and it is a relatively small % of income.