Shep goes to his favorite coffee shop every morning and always buys one large latte, no matter whether there is a special or not (e.g. half price Mondays). What is his price elasticity of demand for lattes?
Price elasticity=0 due to he is very inelastic as he still buys whether the price change or not.
To calculate the price elasticity of demand for lattes, we need to gather some information. Specifically, we need to know the change in quantity demanded and the change in price.
In this scenario, Shep always buys one large latte every morning regardless of the price or special offers. Since there is no change in the quantity demanded, we can say that the change in quantity demanded is zero.
Now, let's consider the change in price. Given that Shep purchases a large latte every day, the price he pays remains the same regardless of any specials or discounts. Therefore, there is no change in price as well.
With both the change in quantity demanded and change in price being zero, we can conclude that the price elasticity of demand for lattes in this scenario is zero.
A price elasticity of demand of zero implies that the demand for lattes is perfectly inelastic. This means that Shep's demand for lattes does not change in response to any changes in price.
To calculate the price elasticity of demand for lattes, we need to know the percentage change in quantity demanded and the percentage change in price. However, in this scenario, the information provided is not sufficient to calculate the price elasticity of demand.
To calculate the price elasticity of demand, we would need data on the quantity of lattes Shep purchases at different prices. Without this data, we cannot determine the change in quantity demanded corresponding to changes in price.
Therefore, without additional information, it is not possible to calculate the price elasticity of demand for lattes in this case.