Q. 75.0( 1 Vote )
How a fall in price of tea will affect an equilibrium price of coffee? Explain the chain effect.
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.
Rate this question :