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The quantity of a good that the consumer chooses can increase or decrease with the rise in the price of a related goods depending on whether the two goods are substitutes or complementary to each other. Goods which are consumed together are called complementary goods. Examples of goods which are complement to each other include tea and sugar, shoes and socks, pen and ink, etc. Since tea and sugar are used together, an increase in the price of sugar is likely to decrease the demand for tea and decrease in the price of sugar is likely to increase the demand for tea. Similar is the case with other complements. In general, the demand for a good moves in the opposite direction of the price of its complementary goods.

If the price of coffee increases then consumption of tea also increases it implies that tea and coffee are __________ .

Solution

Correct Option: 1

When the price of one good rises and the demand for another good also rises, they are substitutes. Consumers switch away from the costlier coffee to tea. Hence tea and coffee are substitute goods. Complementary goods show the opposite relationship (both move in opposite directions).

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