Suppose you know the following things about the market for peanut butter and the relationship between peanut butter and jelly:
Peanuts are an input used to produce peanut butter
Peanut butter is an income-inferior good.
Peanut butter and jelly are complements in consumption.
Grapes are an input used to produce jelly.
Use this information to answer what happens in the market for peanut butter in each of the following scenarios:
Scenario 1: Suppose because of a national drought the price of peanuts increases. In the market for peanut butter, the effect of this shock will be that the _____________ (Demand/Supply increase/decrease) and as a result the ______________ (Price Increase/Decrease) and the _____________. (Quantity Increases/Decreases)
Scenario 2: Suppose the economy enters a recession and household income decreases significantly. In the market for peanut butter the effect of this shock wil be that the _____________ (Demand/Supply increase/decrease) and as a result the ______________ (Price Increase/Decrease) and the _____________. (Quantity Increases/Decreases)
Suppose you know the following things about the market for peanut butter and the relationship between peanut butter and jelly:
Peanuts are an input used to produce peanut butter
Peanut butter is an income-inferior good.
Peanut butter and jelly are complements in consumption.
Grapes are an input used to produce jelly.
Use this information to answer what happens in the market for peanut butter in each of the following scenarios:
Scenario 1: Suppose because of a national drought the price of peanuts increases. In the market for peanut butter, the effect of this shock will be that the _____________ (Demand/Supply increase/decrease) and as a result the ______________ (Price Increase/Decrease) and the _____________. (Quantity Increases/Decreases)
Scenario 2: Suppose the economy enters a recession and household income decreases significantly. In the market for peanut butter the effect of this shock wil be that the _____________ (Demand/Supply increase/decrease) and as a result the ______________ (Price Increase/Decrease) and the _____________. (Quantity Increases/Decreases)
