How will a change in price of coffee affect the equilibrium price of tea? Explain the effect on equilibrium quantity also through a diagram.

Tea and coffee are substitute to each other so the change in price of coffee will have a direct impact on the demand for tea. Increase in price of coffee will increase the demand for tea and decrease in the price of coffee will decrease the demand of tea.

Now with help of the following diagram we will explain it.

Here at price P of coffee the demand for tea is Q, when the price of coffee rises to P₁ the demand for tea rises to Q₁ which shifts the equilibrium point from E to E₁

Here at price P of coffee the demand for tea is Q, when the price of coffee falls to P₁ the demand for tea falls to Q₁ which shifts the equilibrium point from E to E₁