analise the effect of a rise in the price of tea on the demand for milk and the demand for coffee
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Answer:
As tea and coffee are substitutes of each other so if the price of tea will increase then the demand for coffee would also increase . For example if the price of tea is rs.20 and demand for its substitute ( coffee ) is 10. Now the price of tea start increasing continuously by 30,40 and50. ,similarly the demand for coffee also increases by 20,30 and40.
It shows the positive relationship between both the two goods.
In graph, Y- axis shows the price of coffee and X - axis shows the quantity demanded . Quantity demanded increases whereas the price of coffee remain constant.
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Substitute goods are those goods which can be used in place of one another for satisfaction of a particular want, like tea and coffee. Demand for a given commodity varies directly with the price of a substitute good. For example, if price of a substitute good (say, coffee) increases, then demand for given commodity (say, tea) will rise as tea will become relatively cheaper in comparison to coffee.
As seen in the given diagram, price of coffee (substitute good) is shown on the Y-axis and demand for tea (given commodity) on the X-axis. When price of coffee rises from OP to OP
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, demand for tea also rises from OQ to OQ
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