CA Foundation · Business Economics · Theory of Demand and Supply
A consumer's demand for premium coffee increases when the price of tea falls. Which of the following best describes the relationship between these goods from an economics perspective?
Premium coffee and tea are complementary goods in this scenario because a fall in tea's price leads to a decrease in premium coffee demand, indicating consumers view them as alternatives to satisfy a similar consumption need.
- ASubstitute goods
- BComplementary goodsCorrect
- CIndependent goods
- DInferior goods
Explanation
When the price of tea falls, consumers buy more tea and less premium coffee, showing they are substitutes. Complementary goods show the opposite relationship—when one price falls, demand for the other rises. Independent goods have no relationship, and inferior goods relate to income changes, not price changes of other goods.
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