Rise in the price of coffee beans

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Q. We observe that the equilibrium price of a cup of coffee sold in cafes rises but the equilibrium quantity, i.e. cups, of tea sold in cafes falls. Assume that a cup of coffee and a cup of tea are substitutes. Evaluate each of the following statements.

1. A rise in the price of coffee beans, which is a material for a cup of coffee, is responsible for these observations.

2. A rise in the price of tea leaves, which is a material for a cup of tea, is responsible for these observations. 

Reference no: EM13162511

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