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Starbuck?s marketing department




14 If Starbuck?s marketing department estimates the income elasticity of demand for its coffee to be 1.75, how will looming fears of a recession (expected to decrease consumers? income by 4% over the next year) impact the quantity of coffee Starbucks expects to sell?;17 As newly appointed ?Energy Czar? your goal is to reduce the total demand for residential designed to accomplish this goal: (a) a tax that would effectively increase the price of residential heating fuel by $2, (b) a subsidy that would effectively reduce the price of natural gas by $1, or (c) a tax that would effectively increase the price of electricity (produced by hydroelectric facilities) by $5. To assist you in your decision, an economist in your office has estimated the demand for residential heating fuel using a linear demand specification. The regression results are presented on the next page. (pg 114) Based on this information, which proposal would you favor? Explain


Paper#26372 | Written in 18-Jul-2015

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