\begin{tabular}{l} Question 11 \ Which of the following might lead to an increase in the equilibrium price of jelly and a decrease in the equilibrium \ quantity of jelly sold? \ A) An increase in the price of peanut butter, a complement to jelly. \ B) An increase in the price of Marshmallow Fluff, a substitute for jelly. \ OC) An increase in the price of grapes, an input into jelly. \ OD) An increase in consumers' incomes if Jelly is a normal good. \ Bres \ \hline\end{tabular}

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UpStudy AI · Accepted Answer

We begin by recalling that the equilibrium price and quantity are determined by the intersection of the demand and supply curves.

1. An increase in the production cost shifts the supply curve to the left. This means that at every price level, producers are willing to supply less jelly.

2. A leftward shift in the supply curve results in a higher equilibrium price and a lower equilibrium quantity.

Now, let’s analyze each option:

- **A)** An increase in the price of peanut butter, a complement to jelly, will reduce the demand for jelly. A leftward shift in the demand curve would lower both the equilibrium price and quantity.
  
- **B)** An increase in the price of Marshmallow Fluff, a substitute for jelly, will lead consumers to switch to jelly. This shifts the demand curve to the right, increasing both the equilibrium price and quantity.
  
- **C)** An increase in the price of grapes, a key input in producing jelly, increases the production cost. This shifts the supply curve to the left, leading to a higher equilibrium price and a lower equilibrium quantity.
  
- **D)** An increase in consumers' incomes (if jelly is a normal good) shifts the demand curve to the right, increasing both the equilibrium price and quantity.

Since option **C** is the only one that results in a higher equilibrium price and a lower equilibrium quantity, the correct answer is:

$$ 	ext{C} $$
An increase in the price of grapes, an input into jelly, leads to a higher equilibrium price and a lower equilibrium quantity of jelly sold.

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