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What is the main difference between a temporary and permanently negative supply shock?

A) The real interest rate immediately decreases after a temporary shock while it eventually increases after a permanent shock. B) Output increases right away after a temporary shock but the impact does not last whereas for a permanent shock output permanently decreases. C) A temporary shock will see a permanent increase in inflation while inflation will only rise temporarily after a permanent shock. D) all of the above E) none of the above

Suppose that Starbucks reduces the price of its premium coffee from $2.20 to $1.80 per cup, and as a result, the quantity sold per day increased from 350 to 450 . Over this price range, the price elasticity of demand for Starbucks coffee is:

a. 0.40. b. 0.80. c. 1.25. d. 2.50.