Coffee and tea are substitutes.Bad weather that sharply reduces the coffee bean harvest would
A) increase consumer surplus in the market for coffee and decrease producer surplus in the market for tea.
B) increase consumer surplus in the market for coffee and increase producer surplus in the market for tea.
C) decrease consumer surplus in the market for coffee and increase producer surplus in the market for tea.
D) decrease consumer surplus in the market for coffee and decrease producer surplus in the market for tea.

Question

Quizplus · Accepted Answer

Since coffee and tea are substitutes, a decrease in the coffee bean harvest will lead to an increase in the price of coffee, which will lead consumers to switch to tea. As a result, demand for tea will increase and its price will also increase, leading to an increase in producer surplus for tea producers. However, coffee producers will experience a decrease in producer surplus due to reduced demand for their product. Consumers of coffee will experience a decrease in surplus due to having to pay a higher price for their preferred beverage, while consumers of tea will experience an increase in surplus due to the increased availability and lower prices of their preferred beverage. Therefore, the correct answer is C.

Coffee and Tea Are Substitutes