What would happen to the equilibrium price and quantity of peanut butter if the price of peanuts went up,the price of jelly (a complementary good) increased,fewer firms decided to produce peanut butter,and health officials announced that eating peanut butter was bad for you

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Quizplus · Accepted Answer

This scenario involves a combination of changing supply and demand factors. The increase in the price of peanuts and the decrease in the number of firms producing peanut butter both lead to a decrease in supply, which would lead to a higher price and lower quantity. The increase in the price of jelly, a complementary good, would lead to a decrease in demand for peanut butter, which would lead to a lower price and lower quantity. Finally, the announcement that eating peanut butter is bad for you would also decrease demand for peanut butter, leading to lower price and quantity. Overall, the combined effect of these changes is likely to be a decrease in quantity and an ambiguous effect on price, but more likely a decrease in price due to the decrease in demand.

What Would Happen to the Equilibrium Price and Quantity of Peanut