📚 Learning Guide
Substitutes and Complements in Economics
easy

Arrange the following steps to demonstrate the impact of a price increase in potatoes on the demand for corn and peanut butter and jelly:

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Choose the Best Answer

A

Price of potatoes increases

B

Demand for corn increases

C

Price of peanut butter remains stable

D

Demand for jelly increases due to higher peanut butter sales

Understanding the Answer

Let's break down why this is correct

Answer

When the price of potatoes goes up, people may start looking for cheaper alternatives, which are known as substitutes. In this case, corn can be considered a substitute for potatoes; as potatoes become more expensive, some people might buy more corn instead. This increase in demand for corn happens because consumers want to save money while still getting similar food items. On the other hand, peanut butter and jelly are typically complements to bread, which is not directly affected by the price of potatoes, but if fewer people buy potatoes, they might also reduce their overall grocery spending, leading to less demand for peanut butter and jelly. For example, if a family usually buys both potatoes and corn but decides to buy more corn due to the price increase, they may end up cutting back on peanut butter and jelly as they look to save on their total grocery costs.

Detailed Explanation

When the price of potatoes goes up, people might buy less of them. Other options are incorrect because This answer suggests that demand for corn increases right away; This answer assumes that peanut butter's price doesn't change.

Key Concepts

Substitutes and Complements
Consumer Behavior
Market Dynamics
Topic

Substitutes and Complements in Economics

Difficulty

easy level question

Cognitive Level

understand

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