1. A firm increased the price of tea by 10% and sales of tea decreased from1000 packets per week to 950 packets per week. (a)Calculate the PED of tea.
(b)What does this PED value suggest about how sensitive consumers are to price changes?
(c)Draw the demand curve for tea.

2. A firm decreased the price of coffee from $ 20 per packet to $ 12 per packet. This has increased the sales of coffee from 700 packets per week to 800 packets per week.

(a)Calculate the PED of coffee.
(b)What does this PED value suggest about how sensitive consumers are to price changes?
(c)Draw the demand curve for coffee.

3. Explain two reasons why the demand for a product might be price elastic.

4. Does PED affect the total revenue of a firm. Explain how?