Suppose that in October the price of a cup of cafe latte was $2.50 and 400 lattes were consumed. In November the price of a latte was $2.00 and 300 lattes were consumed. What might have caused this change?
A. The price of tea (a substitute for cafe lattes) fell.
B. The price of tea (a substitute for cafe lattes) rose.
C. The price of coffee beans (an input of production of cafe lattes) rose.
D. The price of coffee beans (an input of production of cafe lattes) fell.
Answer: A
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Figure 7-11
Refer to . As price falls from PA to PB, which demand curve represents the most elastic demand?
a.
D1
b.
D2
c.
D3
d.
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