ECONOMICS
DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Increase
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Decrease
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Stay the same
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None of the above
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Detailed explanation-1: -If price of tea increases, the demand for coffee rises.
Detailed explanation-2: -Tea is a substitute for coffee. This means a decrease in the price of tea makes coffee relatively less attractive. This will decrease the demand for coffee which is visualized as a leftward shift in the demand curve. This will cause the equilibrium quantity and price of coffee to fall.
Detailed explanation-3: -Since coffee and tea are substitute goods, the decrease in the price of coffee will make it more lucrative for the consumers to buy coffee, such that the consumers will substitute tea for buying more units of coffee. This will reduce the demand for tea, causing the demand curve of tea will shift to the left.
Detailed explanation-4: -Answer and Explanation: The correct answer is B. Demand for tea will increase. If coffee and tea are substitute goods, and there is an increase in the price of coffee, consumers will consume less coffee and more tea.