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A coffee retailer (Joe’s) developed the following daily demand curve for coffee for Elizabethtown, KY. Q = 500 - 300(P) + 200(Pc) + 0.01(A) Where P is the price of Joe’s coffee, Pc is the price of Starbuck’s, and is income in Elizabethtown. Currently Joe’s and Starbuck’s Coffee are priced at $2.00 per cup, and Elizabethtown income is $60,000. 1) What is Joe’s current daily sales? 2) What happens to Joe’s sales if he increases price to $3.00? 3) Assuming Joe’s price remains $2.00 but Starbucks price is now $1.00, how will this impact Joe’s daily sales? 4) With an improving economy Elizabethtown incomes improve to $70,000, all else equal (Both Joe and Starbuck charge $2.00 per cup). How will this impact Joe’s coffee sales.
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