Unformatted text preview: doesn’t shift at all. It remains right where it was before the price of donuts fell. Therefore, the elasticity of demand for coffee with respect to the price of donuts equals zero. Is this realistic? Maybe. But it seems more plausible to me that I would use some of my increased purchasing power to buy more coffee. In such a case, donuts would be a gross complement to coffee and we’d have to modify our analysis – as I’ll do on the next three pages. Page 71...
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- Fall '10
- Supply And Demand, $1, $2, donuts