Suppose that growing peanuts is made illegal.
a. ?What do you expect to happen to supply, demand, and the equilibrium in the
market for jelly?
b. ?What do you expect to happen to the supply, demand, and the equilibrium in the
market for almond milk? (useful info: almonds typically won’t grow well where
peanuts are farmed)
c. ?Are jelly and almond milk related goods? That is, ?are they complements, substitutes,
both, or neither? Explain.
3) ?Some of the answers to the following are open to debate. Answer based on what you think
would result. You will be assessed by your application of concepts and logic, not by your
opinion of what particular effects would emerge (provided they are reasonable).
Consider a government policy on higher education that proposes to make public colleges
tuition free. Suppose that tomorrow morning, it is determined that this policy will be
implemented. This law would take effect approximately 5 ?years from now.
The correct answer and explanation is:
iturn0image0turn0image1turn0image2turn0image5If the cultivation of peanuts were made illegal, it would have significant effects on related markets, particularly those for jelly and almond milk.
a. Impact on the Jelly Market:
Peanuts are a key ingredient in many jelly products, especially those combined with peanut butter. Prohibiting peanut cultivation would lead to a decrease in the supply of peanuts, resulting in higher prices for peanut-based jelly products. This price increase would likely reduce the quantity demanded, leading to a shift leftward in the supply curve. Consequently, the equilibrium quantity and price of peanut-based jelly would both decrease. However, non-peanut jelly products might experience an increase in demand as consumers seek alternatives, potentially raising their prices and quantities.
b. Impact on the Almond Milk Market:
Almonds are typically grown in regions unsuitable for peanut cultivation. Therefore, making peanut farming illegal would not directly affect almond production. However, if consumers shift from peanut-based products to almond-based alternatives, the demand for almond milk could increase. This heightened demand might lead to a higher equilibrium price and quantity in the almond milk market, assuming the supply remains constant. It’s important to note that while both peanuts and almonds are nuts, they are distinct products with different agricultural requirements and market dynamics.
c. Relationship Between Jelly and Almond Milk:
Jelly and almond milk are neither direct substitutes nor complements. They serve different consumer needs: jelly is a sweet spread typically used on bread, while almond milk is a plant-based beverage alternative to dairy milk. However, in the context of a peanut ban, consumers might seek almond-based products as alternatives, potentially linking the demand for jelly and almond milk indirectly.
Consideration of a Government Policy Making Public College Tuition-Free:
Proposing to make public colleges tuition-free would likely increase the demand for higher education, as more individuals might be inclined to enroll without the financial barrier of tuition fees. This surge in demand could lead to a higher equilibrium quantity of college education. However, if the supply of educational services (e.g., faculty, facilities) does not expand correspondingly, the quality of education might decline due to overcrowding. Additionally, the funding for such a policy would need to be sourced, possibly through increased taxes or reallocation of government spending, which could have other economic implications. The policy’s effectiveness would depend on careful planning and resource allocation to ensure that increased demand does not outstrip the system’s capacity to provide quality education.