Supply and Demand

Given what you have learned about 1) demand (and its determinants) and quantity demanded and 2) supply (and its determinants) and quantity supplied, work with your group members to analyze this hypothetical situation:

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?

To help you figure this out, draw a supply/demand graph for peanut butter for yourself (not to submit to me); then compare your graph with those of your group members. If it’s easy for you to scan your graph and attach it to your post, do that. But if it’s not easy to do that, just describe your graph in words. That is, explain how you labeled the axes of your graph, what the demand curve looks like, what the supply curve looks like, how you labeled the equilibrium price and quantity, any curve shifts, and what happened to equilibrium price and quantity as a result of the curve shift(s) (changes in demand and/or supply). [You will have to be able to explain how to draw a supply/demand graph on the first exam.]