CA Foundation · Business Economics · Theory of Demand and Supply
Which of the following would cause a shift of the demand curve for tea to the right, other things remaining the same?
A rise in the price of coffee shifts the demand curve for tea to the right. Coffee is a substitute, so consumers switch to tea at every price. Changes in tea's own price only move us along the curve, and a costlier complement would shift demand left.
- AA fall in the price of tea
- BA rise in the price of coffee, a substitute for teaCorrect
- CA rise in the price of sugar, a complement of tea
- DA rise in the price of tea
Explanation
A rise in the price of a substitute (coffee) makes tea relatively cheaper, so consumers buy more tea at every price and the demand curve shifts right. A fall or rise in tea's own price causes only a movement along the curve. A rise in the price of a complement like sugar reduces demand for tea and shifts the curve left.
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