If two goods are substitutes, how would a price increase of one affect the demand for the other?

When two goods are substitutes, they can be used in place of one another. If the price of one substitute increases, consumers are likely to seek alternatives to mitigate the impact of the higher price, thus increasing the demand for the other substitute. For example, if the price of coffee rises, many consumers might switch to tea, leading to an increase in the demand for tea.

This relationship occurs because consumers typically make choices based on relative prices. As the price of one good rises, the opportunity cost of not purchasing the substitute increases, prompting consumers to buy more of the alternative good. As a result, the increase in price for one good leads to a corresponding increase in demand for its substitute.

Other outcomes, such as a decrease in demand or no effect, would only hold if the goods were not substitutes or if consumer preferences changed in such a way that demand dynamics shifted. However, since we are focused on the relationship between substitutes, the correct answer illustrates the immediate economic response of consumers adjusting their purchasing behavior in response to changes in price.