Answer to Question #104780 in Microeconomics for Dwen Moses

Question

If the price of cocoa been is to be increased, what is likely to be the effect of this on other beverages such as tea and coffee?

Answer 1

The demand of other beverages such as tea and coffee is likely to increase.

Cocoa bean, tea and coffee are substitute goods. Therefore, when the prices of cocoa beans increases, the consumers are likely to consume more of the substitutes, that is tea and coffee. This will lead to their increase in demand while decreasing the demand of the cocoa beans, all other factors being constant.