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+--- Thread: If the price of coffee rises, how will the total social benefits associated with tea, a substitute good, be af? (/thread-52436.html)
If the price of coffee rises, how will the total social benefits associated with tea, a substitute good, be af? - Crazyseed621 - 12-19-2012 09:05 AM
If the price of coffee rises, how will the total social benefits associated with tea, a substitute good, be affected?
The total social benefits of both goods will decrease.
The total social benefits of tea will increase.
The total social benefits of tea will not change.
The total social benefits of both goods will increase.
- General Grant - 12-19-2012 09:13 AM
Dear Ned,
In a market driven economy, over the long haul the cost of the tea will rise as well. If the market is bringing $x for coffee, then it will be able to survive a price increase for tea and merchants seeing the additional profits, will almost certainly cash in on the opportunity.
For example,
1.You sell coffee and tea for $150 per cup.
2. you raise the cost of the coffee to $2.
3. there is no significant change in the number of cups of each that you sell.
3. You're almost certain to raise the price of your tea to make the additional profits.