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» Solution :A change in PRICE of coffee will directly influence the equilibrium price and QUANTITY of tea as coffee is a substitute of tea. An increase in price of coffee will make tea relatively CHEAPER and demand for tea will rise. It will LEAD to excess demand. On the other hand, a decrease in price of coffee will decrease the demand tor tea as tea will become relatively COSTLY. It will lead to excess supply.