Question

Question 5 (10 points) Saved Knowing that coffee and tea are substitutes, suppose that the demand for coffee increases and, at the same time, the supply of the coffee decreases. What would surely happen in the tea market? The Demand for tea will go up because the price of coffee went up The price of tea will go down because the price of coffee went up. The supply of tea will go down because the price of coffee went up. Not enough data exist to conclude what exactly will happen in the tea market

Answer 1

Q. 5. Ans.The demand for tea will go up because the price of coffee went up.

* when the demand for coffee increases it pushes up the price of it.So naturally tea will be demanded more as both are substitutes.   

*at the same time supply of coffee decreases..When the supply falls more than the demand it will push the price again up.So demand for tea will go up.

Q. 4. Demand and Supply both increase.

* increase in demand and supply simultaneously always leads to increase in equilibrium output.Increase in demand leads to rise in price and increase in supply leads to a fall in price. When demand and supply both increase price may rise or fall or remain constant depending upon the relative magnitude of increase in demand and supply.But the equilibrium output will rise.

Q. 3. Ans.All the above are expected to occur when Blue- ray movies become significantly cheaper.