How will change in price of coffee affect the equilibrium price of tea?use diagram.
Dear Student
Tea and Coffee are two substitute products.
Increase in price of Substitute products
Lets say price of tea remaining constant and the price of coffee increases. As a result of which a rational consumer will decide to substitute tea in place of coffee or may consider to buy more of tea even when its price is constant. And demand curve of tea shifts to the right when price of the substitute commodity increases.
Decrease in Price of Substitute Goods
If price of coffee decreases, consumer will tend to substitute some coffee in place of tea. And consumer will less of tea even when its price is constant. Demand curve for tea will shifts to the left when price of the substitute commodity decreases.
Regards
Tea and Coffee are two substitute products.
Increase in price of Substitute products
Lets say price of tea remaining constant and the price of coffee increases. As a result of which a rational consumer will decide to substitute tea in place of coffee or may consider to buy more of tea even when its price is constant. And demand curve of tea shifts to the right when price of the substitute commodity increases.
Decrease in Price of Substitute Goods
If price of coffee decreases, consumer will tend to substitute some coffee in place of tea. And consumer will less of tea even when its price is constant. Demand curve for tea will shifts to the left when price of the substitute commodity decreases.
Regards