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Theprice of coffee beans (used to make coffee) has increased .The price of tea(a substitute good) has increased. Given these two effects, what can we
Theprice of coffee beans (used to make coffee) hasincreased.The price of tea(a substitute good) hasincreased.Given these two effects, what can we say aboutthe equilibrium price and quantity of coffee?
A.Equilibriumquantity will decrease, equilibrium price will increase.
B.Equilibriumprice will decrease; the effect on quantity is ambiguous.
C.Equilibriumprice will increase; the effect on quantity is ambiguous.
D.Equilibrium quantity will decrease; the effect on price is ambiguous.
Which is correct and why?
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