1. **State the problem:** We need to compute and interpret the Price Elasticity of Demand (PED) for Coffee using the given price and quantity data before and after a price change. 2. **Recall the formula for Price Elasticity of Demand:** $$\text{PED} = \frac{\% \text{ change in quantity demanded}}{\% \text{ change in price}} = \frac{\frac{Q_2 - Q_1}{Q_1}}{\frac{P_2 - P_1}{P_1}}$$ where $P_1$, $Q_1$ are initial price and quantity, and $P_2$, $Q_2$ are new price and quantity. 3. **Identify values for Coffee:** - Initial price $P_1 = 40$ - Initial quantity $Q_1 = 50$ - New price $P_2 = 60$ - New quantity $Q_2 = 30$ 4. **Calculate percentage changes:** - Percentage change in quantity demanded: $$\frac{Q_2 - Q_1}{Q_1} = \frac{30 - 50}{50} = \frac{-20}{50} = -0.4$$ - Percentage change in price: $$\frac{P_2 - P_1}{P_1} = \frac{60 - 40}{40} = \frac{20}{40} = 0.5$$ 5. **Calculate Price Elasticity of Demand:** $$\text{PED} = \frac{-0.4}{0.5} = -0.8$$ 6. **Interpretation:** The PED of -0.8 means demand for coffee is inelastic since the absolute value is less than 1. This implies that the quantity demanded changes proportionally less than the price change. A 1% increase in price leads to a 0.8% decrease in quantity demanded.