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
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 more people start buying tea instead, it shows that coffee and tea are related goods. This relationship means that they are substitutes for each other; when the price of one goes up, people look for the other as an alternative. For example, if a cup of coffee costs $5 now but used to be $3, some coffee drinkers might switch to tea, which could still be $3. This change indicates a positive cross-price elasticity of demand, meaning that the increase in the price of coffee leads to an increase in the demand for tea. Overall, it reflects how consumers adjust their choices based on changing prices of similar products.
Detailed Explanation
When coffee gets more expensive, people look for alternatives. Other options are incorrect because Some might think that if one price goes up, the other must go down; It's easy to think that two goods can be completely unrelated.
Key Concepts
Cross-Price Elasticity of Demand
Substitutes and Complements
Market Behavior
Topic
Cross-Price Elasticity of Demand
Difficulty
easy level question
Cognitive Level
understand
Ready to Master More Topics?
Join thousands of students using Seekh's interactive learning platform to excel in their studies with personalized practice and detailed explanations.