What is the most likely effect on the sale of coffee if there is a significant drop in the price of tea?
a) Sales of coffee will rise, because people will switch to drinking coffee instead of tea.
b) Sales of coffee will stay the same, because the two beverages cater to different tastes.
c) Sales of coffee will fall, because consumers will choose to buy more tea instead.
d) It is impossible to tell whether sales of coffee will change.
To determine the most likely effect on the sale of coffee if there is a significant drop in the price of tea, we need to consider the relationship between coffee and tea, as well as how price changes can influence consumer behavior.
One approach to answering this question is to analyze the concept of substitute goods. Coffee and tea are often considered substitutes because they serve similar purposes as beverages and can be enjoyed in similar situations. When the price of a substitute for a particular product decreases, it typically leads to a decrease in demand for the original product and an increase in demand for the substitute.
Therefore, in this scenario, if the price of tea drops significantly, it is likely that consumers would be more inclined to purchase tea instead of coffee, as it has become comparatively cheaper. This would suggest that the correct answer is option c) Sales of coffee will fall because consumers will choose to buy more tea instead.
It is important to note that consumer preferences and behaviors can be influenced by various factors, so this is a general analysis based on economic principles. Actual market outcomes may also be influenced by other factors, such as brand loyalty, marketing efforts, or consumer demographics.