Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
They are substitutes
B
They are complements
C
They are unrelated goods
D
They are inferior goods
Understanding the Answer
Let's break down why this is correct
Answer
When the price of coffee goes up, and people start buying more tea instead, it shows that coffee and tea are substitutes for each other. This means that when one becomes more expensive, people look for alternatives that can fulfill the same need. For example, if a cup of coffee costs $5 now and many people switch to tea, which costs $3, it indicates that they see tea as a good replacement for coffee. This relationship is measured by something called cross price elasticity of demand, which helps us understand how the demand for one product changes when the price of another product changes. In this case, since the demand for tea rises when coffee prices increase, it confirms that they are related as substitutes.
Detailed Explanation
When coffee becomes more expensive, people look for alternatives. Other options are incorrect because Some might think coffee and tea go together, but that's not true here; It may seem like coffee and tea are unrelated, but they actually affect each other.
Key Concepts
real-world examples
Topic
Cross Price Elasticity of Demand
Difficulty
easy level question
Cognitive Level
understand
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