If the supply of baseball caps decreases, then

Question

Select one:

A. demand will increase to match the increase in supply.

B. the price of peanut butter will increase.

C. the quantity demanded of peanut butter will decrease.

D. the quantity demanded of peanut butter will increase.

E. the quantity supplied of peanut butter will decrease.

Answer 1

This is a bit tricky. The Reduction in Supply of baseball hats makes them more scarce. This raises the Price of Baseball hats. That we know for Sure. If Peanut Butter and Baseball hats are Substitutes this will shifts the Demand for Peanut butter to the Right Increasing quantity demanded. If Peanut butter and Basball hats are complements this will shift the demand for Peanut butter to the left reducing the quantity demanded.

S, A is false. A shift in the supply curve and a movement to the northwest along the demand curve to a new, higher price and lower quantity demanded. A is false for two reasons. Supply decreased( shifted left) it did not Increase and demand curves do not shift because supply curves do.

B,C,D and E are all possible but it all depends upon Cross Price elasticity of demand for Peanut butter and Baseball caps and the elasticity of supply of Peanut butter..

If you need help studying feel free to reach out to me.If you read my testimonials you will see I am very good at this.

Best,

Lenny Dendunnen