Question

What would happen to the equilibrium price and quantity of peanut butter if the price of peanuts went up, the price of jelly fell, fewer firms decided to produce peanut butter, and health officials announced that eating peanut butter was good for you?

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 rise, and the effect on price is ambiguous?

Answer 1

B) Price will rise, and the effect on quantity is ambiguous.

Answer 2

Price will rise and the effect on quantity is ambiguous ( B )

Step-by-step explanation:

The equilibrium price of the peanut butter will most definitely rise in the open market because of the cost of peanuts been used for the production of the peanut butter went up, also the health benefits attached to the consumption of peanut butter will also encourage the increase in price of the peanut butter in the market by the suppliers.

The effect on the quantity will be ambiguous because fewer firms will be producing the peanut butter and this might lead to either shortage in its market quantity or an increase in its quantity when other firms willing to produce start an overproduction of the peanut butter due to the increase in its prices .