Question

In: Economics

This problem is about the market for peanut butter. Bad whether and tornadoes in             Georgia...

This problem is about the market for peanut butter. Bad whether and tornadoes in             Georgia greatly affected the peanut crop, and as a result the market price of peanuts increased.

2i.        Suppose the price of peanuts increased from 20 cents per pound to 30 cents per pound,     and the quantity of peanuts purchased fell from 275 million pounds per month to 225        million pounds. The price elasticity of demand for peanuts is

            ___________________

2ii.       What is the effect of the change in the peanut market for the market for peanut butter?

            a.         Demand for peanut butter decreases.

            b.         Supply of peanut butter decreases.

            c.         The price of peanut butter increases.

            d.         Both answers b and c are correct.

            e.         Both answers a and c are correct.

2iii.      Suppose jelly is a complement to peanut butter. What is the effect in the jelly market of the change in the peanut market and the peanut butter market?

            a.         Demand for jelly decreases.

            b.         Demand for jelly increases.

            c.         Supply of jelly decreases.

            d.         Supply of jelly increases.

            e.         Both answers a and c.

2iv.      Suppose the strawberry crop is unusually large resulting in a decrease in the price of         strawberries and a decrease in the price of strawberry jelly. What would happen to the equilibrium price and quantity of peanut butter from the combination of the change in the       peanut market and the change in the strawberry market?

a.

Price will fall and the effect on quantity is ambiguous.

b.

Price will rise and the effect on quantity is ambiguous.

c.

Quantity will fall and the effect on price is ambiguous.

d.

Quantity will increase and the effect on price is ambiguous

e.

The effect on both price and quantity is ambiguous.

2v.       Suppose the income elasticity of demand for Jiff brand peanut butter is +.5, whereas the       income elasticity of demand for store brand X peanut butter is -.3. If income increases by     10 percent, how much does consumption of Jiff peanut butter change and how much does            consumption of brand X peanut butter change?

            ___________________

Solutions

Expert Solution

2i.        Suppose the price of peanuts increased from 20 cents per pound to 30 cents per pound,     and the quantity of peanuts purchased fell from 275 million pounds per month to 225        million pounds. The price elasticity of demand for peanuts is

Price elasticity of demand = Percentage change in quantity demanded/Percentage change in price = -18.18/50 = 0.36

2ii.       What is the effect of the change in the peanut market for the market for peanut butter?

            d.         Both answers b and c are correct.

Explanation: AS curve shifts to the left.

2iii.      Suppose jelly is a complement to peanut butter. What is the effect in the jelly market of the change in the peanut market and the peanut butter market?

            a.         Demand for jelly decreases.

Explanation: Demand for jelly is positively related to price of peanut butter.

2iv.      Suppose the strawberry crop is unusually large resulting in a decrease in the price of         strawberries and a decrease in the price of strawberry jelly. What would happen to the equilibrium price and quantity of peanut butter from the combination of the change in the       peanut market and the change in the strawberry market?

Ans. b
Explanation: DEmand for peanut butter has increased but supply has fallen.

Rahul Sunny answered 6 months ago
Next > < Previous

Related Solutions

3. Peanut Butter and Jelly - Consider the case of a consumer that buys peanut butter...
3. Peanut Butter and Jelly - Consider the case of a consumer that buys peanut butter in six-packs. Use the information that follows to calculate the appropriate elasticities of demand. a. When the price of a six-pack increased from $18 to $22, the number of six-packs bought decreased from 30 to 20. What is the consumer's price elasticity of demand in this case? How did the consumer's total spending on peanut butter change as a result of this? (Spending by...
Peanut Land Inc. produces all-natural organic peanut butter. The peanut butter is sold in 12-ounce jars....
Peanut Land Inc. produces all-natural organic peanut butter. The peanut butter is sold in 12-ounce jars. The sales budget for the first four months of the year is as follows: Unit Sales Dollar Sales ($) January 80,000 176,000 February 45,000 99,000 March 40,000 88,000 April 42,000 92,400 Company policy requires that ending inventories for each month be 10% of next month's sales. At the beginning of January, the inventory of peanut butter is 31,000 jars. Each jar of peanut butter...
Peanut Land Inc. produces all-natural organic peanut butter. The peanut butter is sold in 12-ounce jars....
Peanut Land Inc. produces all-natural organic peanut butter. The peanut butter is sold in 12-ounce jars. The sales budget for the first four months of the year is as follows: Unit Sales Dollar Sales ($) January 70,000 147,000 February 65,000 136,500 March 60,000 126,000 April 62,000 130,200 Company policy requires that ending inventories for each month be 10% of next month's sales. At the beginning of January, the inventory of peanut butter is 31,000 jars. Each jar of peanut butter...
Aflatoxin residues in peanut butter: In actual testing, 12 lots of peanut butter had aflatoxin residues...
Aflatoxin residues in peanut butter: In actual testing, 12 lots of peanut butter had aflatoxin residues in parts per billion of 4.94, 5.06, 4.53, 5.07, 4.99, 5.16, 4.38, 4.43, 4.93, 4.72, 4.92, and 4.96. a. How many possible bootstrap resamples of these data are there? b. Using R and the sample() function, or a random number table or generator, generate five resamples of the integers from 1 to 12. c. For each of the resamples in b, find the mean...
Aflatoxin residues in peanut butter: In actual testing, 12 lots of peanut butter had aflatoxin residues...
Aflatoxin residues in peanut butter: In actual testing, 12 lots of peanut butter had aflatoxin residues in parts per billion of 4.94, 5.06, 4.53, 5.07, 4.99, 5.16, 4.38, 4.43, 4.93, 4.72, 4.92, and 4.96. a. How many possible bootstrap resamples of these data are there? b. Using R and the sample() function, or a random number table or generator, generate five resamples of the integers from 1 to 12. c. For each of the resamples in b, find the mean...
1. Sketch a graph of the market for peanut butter, labeling the supply and demand curves,...
1. Sketch a graph of the market for peanut butter, labeling the supply and demand curves, both axes, and the equilibrium price and equilibrium quantity. Now, a per-unit tax is imposed on sellers in this market. SHOW and describe what happens in this market. Draw and label any curve shifting and any change in the equilibrium price or equilibrium quantity. What is the new price that buyers pay for peanut butter? What is the price that sellers get to keep...
The price of peanuts increases. How does this affect the market for peanut butter? Group of...
The price of peanuts increases. How does this affect the market for peanut butter? Group of answer choices The supply curve will shift the right. The price will rise. The demand curve will shift to the right. The price will rise. The supply curve will shift to the left. The price will rise.
MARKET EFFICIENCY IN-CLASS WORKSHEET 2 This question examines the market for peanut butter. You will use...
MARKET EFFICIENCY IN-CLASS WORKSHEET 2 This question examines the market for peanut butter. You will use the formulas for a demand and supply curve to identify the equilibrium market price and quantity and analyze the benefits that consumers and producers derive from participation in this market. Below, you have the formulas for the demand curve and the supply curve for jars of peanut butter. If you plug any price into the formula for the demand function, you get the quantity...
You are the Market Manager for Jiffy Nut Peanut Butter. Your product has been in the...
You are the Market Manager for Jiffy Nut Peanut Butter. Your product has been in the maturity phase of the product lifecycle for five years. Because of the increased competition, your sales have begun to decrease. Yesterday, your boss informed you that if sales don’t turn around you might be looking elsewhere for employment. What are three ways to increase the length (time) of the maturity phase? Give one example for each method that you can use for Jiffy Nut...
64) In 2014, the price of peanuts was rising, which lead peanut butter sellers and peanut...
64) In 2014, the price of peanuts was rising, which lead peanut butter sellers and peanut butter buyers to expect the price of peanut butter would rise in the future. Suppose the effect on the buyers was larger than the effect on the sellers. Consequently, in the current market for peanut butter there is a   in the price of peanut butter and   in the quantity of peanut butter. A) rise; a decrease B) fall; an increase C) rise; an increase...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT