Question
If the price of coffee increases, what is likely to happen to the demand for tea (a substitute good)? Demand for tea will increase Demand for tea will decrease Demand for tea will remain the same Supply of tea will increase
Solution
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Vitória
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Resposta
Demand for tea will increase.
Explicação
## Step 1In economics, goods are classified into different types based on their relationship with other goods. One such classification is between substitute goods and complementary goods. ## Step 2Substitute goods are goods that can replace each other. For example, tea and coffee are considered substitute goods because they serve a similar purpose - both are beverages that people consume for their taste and caffeine content. ## Step 3When the price of a good increases, consumers tend to switch to its substitute goods. This is because the substitute goods become relatively cheaper, making them more attractive to consumers. ## Step 4In this case, if the price of coffee increases, consumers will likely switch to tea, which is a substitute good for coffee. This will increase the demand for tea.