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Imagine a small island where Alice and Bob are the only two people who ever buy Kit Kats from the local shops
Imagine a small island where Alice and Bob are the only two people who ever buy Kit Kats from the local shops. Suppose that Alice and Bob each has a standard, downward-sloping, straight-line demand curve for Kit Kats, and that for any given price, Bob will consume at least as many Kit Kats as Alice.
-a) What can we say about how the elasticity of Bob's demand will vary along his demand curve?
- b) What can we say about the elasticity of Bob's demand relative to Alice's?
- c) Draw a set of three (or more) graphs to show how Alice's and Bob's individual demand curves can be combined into a market demand curve for the island. (Make sure to label all intercepts and other relevant points on the graphs.)
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