Final answer:
If the price of margarine drops, we would expect to see an increase in the demand for butter.
Step-by-step explanation:
A change in the price of one good can shift the quantity demanded for another good. If the two goods are complements, like bread and peanut butter, then a drop in the price of one good will lead to an increase in the quantity demanded of the other good.
However, if the two goods are substitutes, like plane tickets and train tickets, then a drop in the price of one good will cause people to substitute toward that good, and to reduce consumption of the other good. Cheaper plane tickets lead to fewer train tickets, and vice versa.
Since butter and margarine are substitutes for each other, if the price of margarine drops, we would expect to see an increase in the demand for butter. When the price of a substitute goes down, consumers tend to shift their consumption towards the cheaper substitute, thereby increasing its demand.
Therefore, the correct answer is 1) An increase in the demand for butter.