With regard to the relationship between substitutes, if the price of coffee increases, what is likely to happen to the demand for tea, a substitute?

When the price of coffee increases, it creates a scenario where consumers are less likely to purchase coffee due to its higher cost. In response, many consumers will look for alternatives that provide similar satisfaction. Since tea is a substitute for coffee, an increase in the price of coffee typically leads to an increase in the demand for tea.

Substitutes are goods that can be used in place of one another, and when the price of one substitute rises, consumers tend to shift their preference to the other, thus increasing its demand. In this case, as coffee becomes more expensive, more consumers will turn to tea as a more affordable option, which directly causes a rise in demand for tea.

This behavior is rooted in the basic principle of substitution effect in microeconomics, where consumers adjust their consumption patterns in response to changes in relative prices. The concept illustrates how changes in the market dynamics of one product can significantly influence the demand for another, particularly in the case of substitute goods.