Rank these three items in terms of the elasticity of the demand for them at any given price, from most elastic to least elastic: hot beverages, coffee and Peets' Coffee. A. coffee, Peets' Coffee, hot beverages B. Peets' Coffee, coffee, hot beverages C. hot beverages, coffee, Peets' Coffee D. coffee, hot beverages, Peets' Coffee

Answer: B. Peets' Coffee, coffee, hot beverages

Explanation:

Elasticity when spoken of generally, is a measure of how the demand in a good reacts to a change in the price of that good. Does the demand increase as a result of the price increwsing, or does it decrease when the price decreases.

The more reactive a good is to a change in price, the more elastic it is considered.

In the above, Option B is the best answer because it shows the goods from a specific product to a general product.

As you move from a specific to a general product, the Elasticity decreases because they are less reactive to price.

For instance, for Peet's Coffee, if the price went up there are many other brands to switch to so it has a high reactivity.

For coffee, if Prices rose, the amount of alternatives are less such as tea or drinks so the reactivity is less.

Hot beverages are so general that they are the least reactive. If their prices went up, there aren't a lot of alternatives so people would just keep buying regardless of the price making it the least Elastic.