If the price of Coffee increases, the demand for Tea will:
Options
AIncrease
BDecrease
CRemain the same
DBecome negative
For any discrepancies in this question, email contact@cadada.in
Theory of Demand and SupplyPYQ - Jan 2021Question 28 of 20
All Questions Correct Answer
✅ Option a — Increase
All Options:
- AIncrease
- BDecrease
- CRemain the same
- DBecome negative
Detailed Solution & Explanation
To understand the relationship between the price of Coffee and the demand for Tea, we need to consider the concept of substitute goods.
• When two goods are substitutes, an increase in the price of one good will lead to an increase in the demand for the other good, as consumers switch to the relatively cheaper alternative.
• In this case, Coffee and Tea are likely to be substitute goods, as they can serve as alternatives to each other in satisfying the consumer's desire for a hot beverage.
• As the price of Coffee increases, it becomes more expensive relative to Tea, leading consumers to switch to Tea, thereby increasing the demand for Tea.
The correct answer is based on the law of demand and the concept of substitute goods.
• Option B is incorrect because a decrease in demand for Tea would only occur if Coffee and Tea were complementary goods, which is unlikely in this scenario.
• Option C is also incorrect because the change in the price of Coffee will have an effect on the demand for Tea, so the demand will not remain the same.
About This Chapter: Theory of Demand and Supply
Paper
Paper 4: Business Economics
Weightage
10%
Key Topics
Law of Demand/Supply, Elasticity, Consumer Behavior
One of the most important chapters in the entire CA Foundation Economics paper. It covers the Law of Demand, Law of Supply, Elasticity of Demand (Price, Income, and Cross), Consumer Behavior (Cardinal and Ordinal approaches), and the concept of Consumer Surplus. Understanding demand and supply curves and their shifts is essential for grasping market dynamics.
View Official ICAI SyllabusExam Strategy Tip
Master the difference between 'Change in Demand' (shift) and 'Change in Quantity Demanded' (movement). This distinction alone can secure 3-5 marks. Also practice Elasticity numerical calculations.
Related Comparison Tables
More Questions from Theory of Demand and Supply
Identify the factor which generally keeps the price-elasticity of demand for a good low:
Supply is a concept:
Demand for a commodity refers to:
Contraction of demand is the result of:
All but one of the following are assumed to remain the same while drawing the demand curve for a commodity. Which one is it?
Which of the following pairs of goods is an example of substitutes?
Ready to Master Theory of Demand and Supply?
Practice all 20 questions with instant feedback, earn XP, track your streaks, and ace your CA Foundation exam.
Start Practicing — It's Free