Question

You love peanut butter. You hear on the news that 50 percent of the peanut crop in the South has been wiped out by drought and that this will cause the price of peanuts to double by the end of the year. As a result, your demand for peanut butter.

Answer 1

Your demand for peanut butter will reduce, because there will be increase in price of peanut butter.

Step-by-step explanation:

The price of peanut butter will increase, due to the increase in price of the raw material used in its production.

According to the law of demand, the higher the price of a good or service, the less inclined consumers will be to pay for that good or service.

Simply put, the higher the price of a commodity, the lower the demand.

Therefore, in the scenario above, the increase in price of peanuts will cause an increase in the price of peanut butter, and this will reduce its demand.