If the price of coffee rises, how will the total social benefits associated with tea, a substitute good, be affected?

a) The total social benefits of both goods will decrease;

b) The total social benefits of tea will increase;

c) The total social benefits of tea will not change;

d) The total social benefits of both goods will increase.

b) The total social benefits of tea will increase.

Social benefit is equal to: private benefit + external benefit.

Because the price of coffee just increased, several people will purchase tea instead (tea being a substitute good, which means that you could drink coffee or tea with no preference). The demand for caffeinated tea is therefore increasing (shift to the right of the demand curve on the AS/AD diagram). The private benefit will increase: according to scientific studies, drinking tea reduces the risk of heart attacks, reduces blood pressure and lowers blood sugar levels. Because total private benefits increase, total social benefits will increase as well. You can also argue that external benefits (positive externalities provided to someone other than the consumer or producer) will also increase (the nice smell of tea in the morning is shared by everyone!).