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Consider the market for coffee, and suppose that the demand for coffee falls (because of a fall in the price of tea, a substitute good),
Consider the market for coffee, and suppose that the demand for coffee falls (because of a fall in the price of tea, a substitute good), leading to a new equilibrium price and quantity of coffee. Using diagrams, explain the role of price as a sigal and as an incentive for consumers and for firms in reallocating resources.
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