Question

price of coffe rises , why the price of tea remain constant .how would the consumer react to this situation to restored his equality?use the law of equality marginal equality​

Answer 1

Explanation:

Consumer Equilibrium and Demand ... E is the initial equilibrium where supply and demand curves intersect each other. ... When the price of coffee increases, demand curve (for tea) shifts forward.

Answer 2

Explanation:

Coffee and tea are substitute goods. Let us assume that the price of coffee increases. This will cause a shift in demand curve for tea to the right as shown in Fig, D is the initial demand curve and S is the initial supply curve related to tea.E is the initial equilibrium where supply and demand curves intersect each other. OP is the equilibrium price and OQ is the equilibrium quantity of tea. When the price of coffee increases, demand curve (for tea) shifts forward as indicated by D

1

. Consequently, equilibrium price (of tea) increases from OP to OP

1

and equilibrium quantity increases from OQ to OQ

1

.

In case price of coffee decreases, demand curve for tea would shift to the left. Consequently, new equilibrium would indicate a fall in equilibrium quantity as well as a fall in equilibrium price.

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