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Cups of coffee and donuts are complements. Both have inelastic demand. A hurricane destroys half the coffee bean crop. Use appropriately labeled diagrams to answer the following questions. a. What happens to the price of coffee beans? b. What happens to the price of a cup of coffee? What happens to total expenditure on cups of coffee? c. What happens to the price of donuts? What happens to total expenditure on donuts?

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Principles of Economics (MindTap C...

8th Edition
N. Gregory Mankiw
Publisher: Cengage Learning
ISBN: 9781305585126

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Chapter
Section
BuyFindarrow_forward

Principles of Economics (MindTap C...

8th Edition
N. Gregory Mankiw
Publisher: Cengage Learning
ISBN: 9781305585126
Chapter 5, Problem 5PA
Textbook Problem
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Cups of coffee and donuts are complements. Both have inelastic demand. A hurricane destroys half the coffee bean crop. Use appropriately labeled diagrams to answer the following questions.

a. What happens to the price of coffee beans?

b. What happens to the price of a cup of coffee? What happens to total expenditure on cups of coffee?

c. What happens to the price of donuts? What happens to total expenditure on donuts?

Subpart (a):

To determine
The inelasticity of demand and its effect.

Explanation of Solution

Figure 1 illustrates the impact of shift in the supply curve on the equilibrium position.

The effect on the market for coffee beans is illustrated in figure 1...

Subpart (b):

To determine
The inelasticity of demand and its effect.

Subpart (c):

To determine
The inelasticity of demand and its effect.

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