This question deals with the concept of substitute goods in economics. Substitute goods are products that can be used in place of each other. When the price of one substitute good changes, it affects the demand for the other.
C) Demand for tea increases, as buyers switch towards the relatively cheaper substitute. This option correctly describes the economic principle of substitute goods. When the price of one substitute (coffee) rises, consumers will shift their consumption to the other substitute (tea), leading to an increase in the demand for tea.
This question tests understanding of complementary goods and their relationship in terms of demand. Complementary goods are products that are consumed together. When the price of one complementary good changes, it affects the demand for the other.
Correct Option: D) Demand for cars decreases, as running a car becomes more expensive overall
This question tests the understanding of how consumer income affects the demand for different types of goods, specifically a "normal good." The key is to recall the definition of a normal good in economics.
Correct Option: A) Demand for the good increases
When consumer income rises, and the good is a normal good, consumers are able and willing to purchase more of it. This directly leads to an increase in demand for that good.
The question asks about the behavior of demand for an inferior good when consumer income increases. To answer this, we need to understand the definition of an inferior good and how it relates to income elasticity of demand.
B) Demand for the good decreases as consumers switch to superior alternatives — This statement accurately describes the characteristic behavior of an inferior good. As income increases, consumers can afford and prefer superior alternatives, leading to a reduction in demand for the inferior good.
This question tests understanding of the factors that influence demand and how they are represented graphically. Specifically, it asks about the effect of a change in consumer tastes and preferences on the demand curve.
D) The entire demand curve for that commodity to shift to the right. A favourable change in consumer tastes and preferences is a non-price determinant of demand. When consumers like a product more, they will buy more of it at every possible price, causing the entire demand curve to shift outwards (to the right).
This question tests understanding of market demand and factors that cause shifts in the demand curve. We need to analyze how an increase in the number of buyers affects the overall market demand, assuming all other factors remain constant.
C) Market demand to increase, shifting the demand curve to the right. An increase in the number of buyers directly translates to a higher aggregate demand for the product at every price point, causing the entire demand curve to shift to the right.