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If the price of a cup of Dunkin' Donuts coffee increases while the price of a Starbucks latte is unchanged, we expect the number of lattes purchased at Starbucks to:

a) decrease, as some consumers will switch to Dunkin' Donuts.

b) increase, as Starbucks becomes relatively cheaper.

c) remain unchanged, as the prices of lattes are unaffected.

d) decrease, as Starbucks raises its prices to match Dunkin' Donuts.

Answer :

Final answer:

If the price of Dunkin' Donuts coffee rises and Starbucks latte prices remain unchanged, the number of Starbucks lattes purchased is expected to increase as they become a relatively more affordable substitute.

Explanation:

When the price of a Dunkin' Donuts coffee increases while the price of a Starbucks latte remains unchanged, we expect the number of lattes purchased at Starbucks to increase, as Starbucks becomes relatively cheaper. This phenomenon can be explained by the economic principle of substitutes in consumption. As Dunkin' Donuts coffee becomes more expensive compared to Starbucks lattes, it is likely that some consumers will switch to the relatively less expensive Starbucks option, reflecting a change in demand due to a price increase of a substitute good.

In terms of economic demand theory, Starbucks lattes and Dunkin' Donuts coffees are seen as substitute goods for many consumers. When the price of one substitute rises, the demand for the other often increases because consumers seek a more cost-effective alternative. This shift could potentially move the demand curve for Starbucks lattes to the right, as more consumers choose to purchase them over the now more expensive Dunkin' Donuts coffee.

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