The demand for coffee and tea is

Analyze the question: Coffee and tea are two different goods. The question asks what kind of demand exists for them, which depends on how the two goods relate to each other.

Concept: The types of demand are:

• Joint demand: goods used together to satisfy one want, such as car and fuel, or bread and butter.
• Competitive demand: goods that are substitutes. Each can be used in place of the other, so a rise in the price of one increases demand for the other.
• Composite demand: one good with several different uses, such as electricity (lighting, cooking, industry) or palm oil.
• Derived demand: demand for a good because it is needed to produce something else, such as demand for labour, cement or bricks.

Solution:

1. Coffee and tea are both beverages, and a person can drink one instead of the other.
2. They are substitutes. If the price of coffee rises, consumers switch to tea, and demand for tea goes up.
3. This relationship is competitive demand.
4. The other options do not fit: • They are not normally consumed together as a single package, so A (joint) is wrong. • Each is a single good, and the question is not about one good with many uses, so C (composite) is wrong. • Neither is mainly demanded as an input for making another product, so D (derived) is wrong.

Answer: B, competitive demand.

Tip: Ask yourself whether the goods are used together or in place of each other. Together means joint demand. In place of each other means competitive demand. Examples to remember are tea and coffee, or Peak milk and Cowbell milk, for competitive demand, and bread and butter for joint demand.