Question

What happens to the equilibrium price and quantity for jelly when the price of peanut butter increases? (Assume that peanut butter and jelly are typically consumed together).

Answer 1

Answer:

Equilibrium price will fall and quantity demanded for jelly will also fall

Explanation:

Peanut butter and jelly are consumed together. It means they are complementary goods. These are those goods which are bought together. So increase or decrease in the price of one commodity will automatically affect the demand for another commodity.

When the price of peanut butter increases than people will demand less of peanut butter. Similarly, the demand for jelly is associated directly with the demand for peanut butter. So it will also fall . Due to the fall in the price of jelly and simultaneous fall in demand, the equilibrium price will fall.