Question

If tea and coffee are substitute goods, which of the following is likely to occur if the price of coffee has increased?

Answer 1

Answer:

A. The demand curve for tea shifts to the right

Explanation:

Demand is defined as the measure of sensitivity of quantity demanded is a group with changes in price.

However when there is an increase or decrease in demand as a result of other factors except for price it is called shift in demand.

In the given scenario if the price of coffee increases, it will result in less amount of coffee being demanded. People will look for a substitute (tea).

Demand for tea will increase as a result of shift of the demand curve for real to the right.

This is illustrated in the attached diagram.

Answer 2

Answer:

A. The demand curve for tea shifts to the right.

Explanation:

In the above condition where tea and coffee are substitute goods amongst themselves, it is easily to explain according to the supply and demand theories that when price of coffee increases, the demand curve for tea shifts to the right.

It can be easily seen that a relation showing the amounts of a commodity

there is an increase or decrease in demand as a result of other factors that buyers purchase at alternative prices during a given period of time, and the fact that these goods are substituted against each other made it possible.