How wm a change in price of coffee affect the equilibrium price of tea? Explain the effect on equilibrium quantity aJso through a diagram.

How wm a change in price of coffee affect the equilibrium price of tea

1.	How wm a change in price of coffee affect the equilibrium price of tea? Explain the effect on equilibrium quantity aJso through a diagram.
Answer» <html><body><p></p>Solution :A change in <a href="https://interviewquestions.tuteehub.com/tag/price-1165141" style="font-weight:bold;" target="_blank" title="Click to know more about PRICE">PRICE</a> of coffee will directly influence the equilibrium price and <a href="https://interviewquestions.tuteehub.com/tag/quantity-1174212" style="font-weight:bold;" target="_blank" title="Click to know more about QUANTITY">QUANTITY</a> of tea as coffee is a substitute of tea. <br/> An increase in price of coffee will make tea relatively <a href="https://interviewquestions.tuteehub.com/tag/cheaper-914664" style="font-weight:bold;" target="_blank" title="Click to know more about CHEAPER">CHEAPER</a> and demand for tea will rise. It will <a href="https://interviewquestions.tuteehub.com/tag/lead-540361" style="font-weight:bold;" target="_blank" title="Click to know more about LEAD">LEAD</a> to excess demand.<br/> On the other hand, a decrease in price of coffee will decrease the demand tor tea as tea will become relatively <a href="https://interviewquestions.tuteehub.com/tag/costly-426705" style="font-weight:bold;" target="_blank" title="Click to know more about COSTLY">COSTLY</a>. It will lead to excess supply.</body></html>