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Analyzing Changes in Equilibrium

If the price ...

Question

If the price of tea falls, demand for coffee will __________.

A

increase

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B

decrease

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C

remain same

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D

none of these

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Solution

The correct option is C decrease
If the price of tea falls, demand for coffee will decrease as tea and coffee are substitute goods. Hence, when the price of tea falls, consumers will spend more on tea and thus the demand for coffee will fall.

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