a) An increase only in Quantity Demanded of coffee. ((b) An decrease only in Qua
ID: 1140892 • Letter: A
Question
a) An increase only in Quantity Demanded of coffee. ((b) An decrease only in Quantity Demanded of coffee. (c) An increase in Demand for coffee. (d) An decrease in Demand for coffee. (e) No change in the market for coffee. 7. Suppose, instead, that Ross and Rachel find out when they walk into Central Perk that the price of tea (a great substitute for coffee) has increased by 75% from the previous day. Ceteris paribus, which of the following is most likely to occur in the market for coffee: (a) An increase only in Quantity Demanded of coffee (b) An decrease only in Quantity Demanded of coffee. (c) An increase in Demand for coffee. (d) An decrease in Demand for coffee. (e) No change in the market for coffee.Explanation / Answer
Answer- Option (c)
Ceteris Paribus, when there is increase in the price of tea, there will be decrease in the quantity demanded of the tea and vice versa. And for other substitutes, (in this case coffee), there will be increase in the demand for coffee (substitute good).
So, when the price of tea will increase, there will be increase in demand and not "quanitity demanded" of coffee.
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