Answer to Question #84380 in Macroeconomics for Liviana Mupanda

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 of both peanut butter and almond butter are rising due to forces of demand and supply. There is a reduced supply of peanut butter due to the destruction of peanut crops by fungus. This shortage of peanut butter has led to the price increase of the commodity.

The increase in the price of almond butter is due to the growth in its demand. More people have turned to the product as a healthy alternative to the almond butter that is in short supply.

Therefore, the increase in peanut butter prices is due to a shortage of the same while the price of almond butter has increased due to a growth in its demand.