Unformatted text preview: . 67 when the price of wine falls from $2 to $1. Graphically, the demand curve for beer shifts inward when the price of wine falls (because I’m demanding less beer at a price of $2). The elasticity of demand for beer with respect to the price of wine equals 0 . 5 at a price of $2 per wine and it equals 0 . 667 at a price of $1 per wine. NB: In this case, the demand curve shift is larger (in absolute value) than the shift in the previous case. The difference in shift size is reflected in the larger cross price elasticities. Page 77...
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This note was uploaded on 12/29/2011 for the course ECO 311 taught by Professor Willis during the Fall '10 term at SUNY Stony Brook.
- Fall '10