{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

microbook_3e-page74

# microbook_3e-page74 - of \$2 per donut is –0 875 and at a...

This preview shows page 1. Sign up to view the full content.

Demand Curves in the Case where Donuts are a Gross Complement to Coffee Once again, a decrease in the price of donuts, increases the quantity of donuts that I demand. Specifically, when the price is \$2, I demand 25 donuts, but when the price is \$1, I demand 45 . 68. Once again, we can sketch out the demand curve by connecting those two points on a graph. Does that demand curve look less elastic to you than the one in the case where donuts are neither a gross complement nor a gross substitute for coffee? It should. The price elasticity of demand for donuts at a price
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: of \$2 per donut is –0 . 875 and at a price of \$1 per donut it’s –0 . 864. Since donuts are a gross complement to coffee, my consumption of coffee rises from 25 to 27 . 16 when the price of donuts falls from \$2 to \$1. Graphically, the demand curve for coffee shifts outward when the price of donuts falls (because I’m demanding more coffee at a price of \$2). The elasticity of demand for coffee with respect to the price of donuts equals –0 . 125 at a price of \$2 per donut and it equals –0 . 115 at a price of \$1 per donut. Page 74...
View Full Document

{[ snackBarMessage ]}

Ask a homework question - tutors are online