Answer to Question #93479 in Macroeconomics for Amar Ayer

Question

Peanut crops have been destroyed by a fungus. Consumers are substituting almond butter for peanut butter because they perceive it to be a healthier option. The prices of both peanut butter and almond butter are rising. Why?

Answer 1

The prices on peanut butter and almond butter are rising because of demand and supply. Peanut crops have been destroyed by a fungus, so supply of peanut butter is reduced. Prices for peanut butter is increased, because of deficiency of peanut butter.

Demand for almond butter is increased, so the price is increased also. Almond butter became an alternative to the peanut butter.

So, the increase in peanut butter prices because of its deficit . The price of almond butter has increased because growth in its demand.