Peanut butter and jelly are complements in consumption. The price of peanut butter rises.?
What happens to the demand for peanut butter?
Answer:
If by compliments you mean they are substitutes for one another it is simple.
As the price for peanut butter increase, less people are willing to pay the higher price, therefore the demand decrease and people look for substitutes.
Jelly being (if you mean subsitutes) compliment would have a increase in demand due to those leaving peanut butter for the cheaper alternative.
However, if you mean that peanut butter and jelly are consumed together such as the sample of Guns and ammunition. Then as the price of peanut butter increase the demand would decrease as would the demand for jelly.
As stated above, it is VERY important to realize that the demand curve does not shift. It just means that the demand is less due to the higher price.
The demand for peanut butter and jelly will both go down, which on the demand curve means that it shifts to the left.
Demand for JELLY shifts to the left. The entire curve moves.
Quantity demanded for peanut butter falls; be careful, though...there is nothing in this scenario that implies the demand curve for peanut butter has moved.
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Edit:
The next poster missed that question on his test. If peanut butter and jelly were SUBSTITUTES, the demand for jelly would rise in response to an increase in the price of peanut butter.
Complements, on the other hand, tend to be consumed together.
The demand for jelly increases. The demand for peanut butter decreases.
We just had a test about this tonight in my ECO-2610 class.
Think of the demand curve. At higher prices, fewer units of a good are demanded at that price. On the demand curve for peanut butter, moving to a higher price means moving up the demand curve to fewer jars of peanut butter demanded at that price.
(Demand is how much you are able and willing to buy at every price)
Demand moves UP OR DOWN the curve due to price changes of the good in question.(Those are the only two things on the graph - Price of one specific good and Quantity)
The demand curve SHIFTS due to external factors, i.e factors other than the price of the good whose curve is in question.
That means that had the price of peanut butter remained the SAME, yet something else had happened to affect its demand, the demand curve for peanut butter would shift. A shift Inwards means less is demanded at every price - it is not the price that is affecting demand. A shift outwards mean more is demanded at every price than it was before.
In this case the two are complements, i.e are consumed together..
So naturally the price of one going up would put you off (demanding) the other.
Since the price of Jelly hasnt changed, the curve remains the same, it just SHIFTS inwards because of this external factor( a price change other than its own) and now less jelly is demanded at the same prices .
Hope this was helpful.
Demand for jelly decreases.
Demand for peanut butter stays the same, but the quantity demanded will fall.
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