ECONOMICS
DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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the demand for tea is not affected
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the demand for coffee decreases
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the demand for tea decreases
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the demand for coffee increases
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Detailed explanation-1: -If the price of tea falls, demand for coffee will decrease as tea and coffee are substitute goods. Hence, when the price of tea falls, consumers will spend more on tea and thus the demand for coffee will fall.
Detailed explanation-2: -Hence, a decrease in the price of coffee will lead to a decrease in the price of tea and a decrease in the demand for tea, as people will switch over to consumption of coffee.
Detailed explanation-3: -Increase in price of coffee will increase the demand for tea and decrease in the price of coffee will decrease the demand of tea.
Detailed explanation-4: -Tea and coffee are substitute goods. A fall in price of tea will directly influence the equilibrium price and quantity of coffee. As a result the demand curve of tea will shift to the right. Price of tea will automatically increase the demand of tea but will decrease the demand of coffee.
Detailed explanation-5: -According to the law of demand, an increase in the price of a good, holding other things content, will decrease the quantity demanded for the good. Hence an increase in the price of coffee will decrease the quantity demanded for coffee.