Americans love to eat peanut butter & jelly sandwiches. If the price of jelly increases (while...

Americans love to eat peanut butter & jelly sandwiches. If the price of jelly increases (while other things remain constant), what effect will this have on the market for peanut butter?

Price rises and quantity remains the same
Price rises, quantity falls (INCORRECT)
Both price and quantity rise
Bothe price and quantity fall
Price falls, quantity rises

Solutions

Expert Solution

As we can see that Americans love to eat peanut butter & jelly sandwiches . So these two goods seem to be substitute good . Substitute goods are those goods which are used in place of one another .

So , if the price of jelly increases , then consumer will prefer more peanut butter , as peanut butter is more cheaper for them as compare to jelly and both are substitute of each other . Hence Demand for peanut butter will shift rightwards due to which Price and Quantity of peanut butter will rise .

Hence (C) part is a correct answer

Rahul Sunny answered 1 year ago

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