Read the following statements carefully.
Statement I: If the price of coffee rises, the consumption of tea is likely to go up.
Statement II: The demand for a good usually moves in the opposite direction of the price of its substitutes.
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Statement I is true but Statement II is false.
Tea and coffee are substitutes: one can be used in place of the other.
Statement I: If the price of coffee rises, the consumption of tea is likely to go up. — True. Costlier coffee makes consumers shift to tea.
Statement II: The demand for a good usually moves in the opposite direction of the price of its substitutes. — False. It moves in the same direction as the price of a substitute. The opposite direction holds for complements, like tea and sugar.
NCERT (2026-27): “2.4.4 Substitutes and Complements … In general, the demand for a good moves in the opposite direction of the price of its complementary goods. In contrast to complements, goods like tea and coffee are not consumed together. In fact, they are substitutes for each other. Since tea is a substitute for coffee, if the price of coffee increases, the consumers can shift to tea, and hence, the consumption of tea is likely to go up. On the other hand, if the price of coffee decreases, the consumption of tea is likely to go down. The demand for a good usually moves in the direction of the price of its substitutes.” |