How will a change in price of coffee affect the equilibrium price of tea? Explain the effect on equilibrium quantity also through a diagram.
Increase in price of coffee will result in rise in demand for tea as they are substitute goods. When price of coffee is Rs 20, the demand for tea is shown by DD curve. When price of coffee increases to Rs 25, the demand for tea shows a rightward shift which is reflected by D1D1 curve.
