The price of peanuts increases. At the same time, we see the price of Jelly rise

Question

The price of peanuts increases. At the same time, we see the price of Jelly rise. How does this affect the market for peanut butter? A. the demand curve will shift to the left; the supply curve will shift to the left. B. the demand curve will shift to the left; the supply curve will shift to the right. C. the demand curve will shift to the right; the supply curve will shift to the left. D. the demand curve will shift to the right; the supply curve will shift to the right.

I understand that the supply curve shifts to the left, but how does the demand curve shift to the right considering the price of its complement product (Jelly) increased? I've learned that the increase in the price of a complement product makes demand decrease. Could you please explain why the answer is C.?

Explanation / Answer

The correct answer to the given question is

" The demand curve will shift to the left and the supply curve will shift to the left".

Peanuts butter is made from peanuts. If the price of peanuts rises obviously the cost will rise to which the price of peanuts will also rise which will reduce the demand and will shift ot towards left. It could be understand in another way as a complement product, jelly, witnesses rise in price there would be lesser demand of jelly and to which the complementary products will be less demanded thus demand will again shift to left because of reduction in demand.

Talking about supply of peanuts butter, with rise in main input, peanuts, supply will be less becuase of increased cost and resultant decrease in demand after the price of butter increases.

Thus the correct answer is not C but A.

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