Final answer:
Decrease in the cost to harvest peanuts and the price of jelly will lead to a decrease in the equilibrium price and an increase in the equilibrium quantity of peanut butter.
Step-by-step explanation:
In this scenario, the decrease in the cost to harvest peanuts and the decrease in the price of jelly will affect the equilibrium price and quantity of peanut butter. Peanut butter is made from peanuts and jelly, and these changes in the cost of production and price of inputs will impact the supply of peanut butter.
If the cost to harvest peanuts has decreased dramatically, it will lead to a decrease in the cost of producing peanut butter. This will cause the supply of peanut butter to increase, since it is now cheaper for peanut butter producers to make their product. As a result, the equilibrium price of peanut butter will decrease, since there is a larger supply of peanut butter available in the market.
Similarly, if the price of jelly has decreased due to the recession, it will also impact the supply of peanut butter. Since jelly is an input in the production of peanut butter, a decrease in the price of jelly will lower the cost of producing peanut butter. This will further increase the supply of peanut butter, leading to a decrease in its equilibrium price.