Question

Tea and coffee are _______ goods.
1. Substitute
2. Normal
3. Complimentary
4. Inferior

Answer 1

Correct Answer - Option 1 : Substitute

Tea and coffee are substitute goods.

• Substitute goods or substitutes are at least two products that could be used for the same purpose by the same consumers.
• ​Substitute goods are identical, similar, or comparable to another product, in the eyes of the consumer.
• Substitute goods can either fully or partly satisfy the same needs of the customers. Therefore, they can replace one another, so the consumer believes.
• If the price of one of the products rises or falls, then demand for the substitute goods or substitute goods (if there is just one other) is likely to increase or decline.
• Tea is a substitute good for Coffee, and vice-versa. When the price of Tea goes up, demand for Coffee will subsequently rise (if Coffee does not raise its price).