Question

If consumers view cappuccinos and lattés as substitutes, what would happen to the equilibrium price and quantity of lattés if the price of cappuccinos falls?

Answer 1

Answer:

Equilibrium price and quantity would fall

Explanation:

Substituite goods are goods that can be consumed in place of each other. If the price of a good increases, consumers can easily subsituite to the other good.

If cappuccinos and lattés are subsituites, if the price of cappuccinos falls, the demand for cappuccinos would increase and the demand for lattes would fall because lattes are now relatively more expensive than cappuccinos.

The fall in demand leads to a fall in quantity demanded and price.

I hope my answer helps you.