Using demand and supply analysis, apply supply and demand to the following scena

Question

Using demand and supply analysis, apply supply and demand to the following scenario. The following facts describe the peanut and peanut butter industry:

Another hot, dry summer devastated the 2011 peanut crop. Although peanuts are typically planted between mid-April and June, farmers had to wait several weeks after that period for rain.

Many peanut butter producers looked for ways to cut costs in other areas, such as shipping and warehousing.

Because of the high price of cotton, some farmers had already planted cotton in place of peanuts.

The scorching heat and drought singed many peanut plants, leaving more peanuts to be processed for oil rather than used for peanut butter.

Explain the effects of these changes, using supply-and-demand analysis on both the peanut and the peanut butter markets.

Explanation / Answer

From the excerpt,

multiple factors lead to the decrease in the production of peanuts and also the supply was delayed.

Further, peanuts produced were suitable for peanut oil and not for peanut butter.

All these lead to decreased supply of peanuts which can be used for peanut butter. This would move the Price-Supply curve in an upward direction since the prices of peanuts useful for peanut butter would be significantly higher.

Thus, the interesecting point of the Demand supply curves would move towards left, i.e. the Equilibrium point would move towards left. Futher, in order to continue producing peanut butter without increasing its overall cost of production, its producers would look towards alternative ways to cut down costs such as reducing shipping or warehousing or any other ways to reduce costs.

Related Questions

Navigate

• Browse (All)
• Browse U
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.