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In some places, tea and coffee have a negative cross price elasticity of demand. Assume that a technological innovation in the coffee cultivation occurs that
In some places, tea and coffee have a negative cross price elasticity of demand. Assume that a technological innovation in the coffee cultivation occurs that allows higher quantities to be produced and harvested.
a) How will the price of tea change? Provide a graph showing the likely price change(s) accompanied by a brief explanation.
b) On the same graphs, show the subsequent changes in both markets and succinctly explain the feedback effects in words.
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