1. The following is an estimited global de. lanc. function for cr ffee: Q_(c)= 100.6125-0.393P_(c) Assume that tice average consumption of coffee over ten years was 61.33 million Kilograms and the ererige price was Ksh74.54 per kilogram. Determ ine the will elasticity of demond. C Niari..

To determine the price elasticity of demand, we use the formula for elasticity:<br /><br />\[ E_d = \frac{\partial Q_c}{\partial P_c} \times \frac{P_c}{Q_c} \]<br /><br />From the given demand function:<br /><br />\[ Q_c = 100.6125 - 0.393P_c \]<br /><br />The derivative of \( Q_c \) with respect to \( P_c \) is \(-0.393\).<br /><br />Given:<br />- Average consumption (\( Q_c \)) = 61.33 million kilograms<br />- Average price (\( P_c \)) = Ksh 74.54 per kilogram<br /><br />Substitute these values into the elasticity formula:<br /><br />\[ E_d = (-0.393) \times \frac{74.54}{61.33} \]<br /><br />Calculate:<br /><br />\[ E_d = -0.393 \times 1.215 \approx -0.477 \]<br /><br />Therefore, the price elasticity of demand is approximately \(-0.477\). This indicates that the demand for coffee is inelastic since the absolute value is less than 1.