Q. 75.0( 1 Vote )

How a fall in price of tea will affect an equilibrium price of coffee? Explain the chain effect.

Answer :

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.


P = D

Therefore, there will be decrease in the demand of coffee.

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