Suppose you drink more tea because the price of coffee has increased.Which of the following best explains your behaviour?

Question

Quizplus · Accepted Answer

The substitution effect explains that when the price of one good increases, consumers tend to substitute it with a substitute good whose price has remained the same. Therefore, if the price of coffee, which is a substitute for tea, increases, consumers will switch to drinking more tea, resulting in an increase in the demand for tea.

Suppose You Drink More Tea Because the Price of Coffee