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The following graph shows the market for peanut butter in Philadelphia, where there are over 1,000 stores that sell peanut butter at any given moment

Economics Dec 05, 2020

The following graph shows the market for peanut butter in Philadelphia, where there are over 1,000 stores that sell peanut butter at any given moment. Suppose the price of hazelnut spread increases. (Assume that people regard peanut butter and hazelnut spread as substitutes.)Show the effect of this change on the market for peanut butter by shifting one or both of the curves on the following graph, holding all else constant.

Expert Solution

This circumstance portrays the conduct of substitute products when there is an adjustment in cost for one of the merchandise.
 
Right now, margarine and hazelnut spread were viewed as substitute products.
 
This implies when the cost of one of the merchandise builds, the interest for the substitute great increments while its value stays steady.
 
Right now, was given that the cost of Hazelnut spread has been expanded. Subsequently, there will be an expanded interest for nutty spread which is the substitue acceptable.
 
Graphically, the interest bend will move to a more elevated level on the correct side showing that cost of Peanut spread staying consistent, the amount of nutty spread sold will increment bringing about a rightward move of the interest bend.
 
Correspondingly, the stock bend will likewise move towards the privilege on the lower side of the underlying stockpile bend showing that the amount of nutty spread sold expands which will bring about a higher inventory.
 
The wonder clarified above is graphically spoken to beneath with the cost on the Y-hub and quantityon the X-pivot. It very well may be seen that when the cost of a hazelnut spread builds, the interest for nut increments. Graphically there is an upward right move in the interest bend demonstrating an expansion in amount sold while cost staying steady.

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