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  • Costs and revenues, price elasticity of demand, cost-push inflation

Click to read the article below and then answer the questions:

Pret A Manger to increase cost of its coffee subscription by 20%

  • Distinguish between i) cost; and ii) price

  • What is the current rate of inflation as measured by the CPI?

  • Pret must think that demand is sufficiently robust to the extent that increasing the price of its subscription service will not reduce demand for its products. Using a diagram, analyse this train of thought in the context of price elasticity of demand

  • With the rate inflation set to halve by the end of the year, evaluate whether Pret will then reverse this price rise

Gavin Clarke, Emmanuel College

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