How Will Peanut Price Hike Impact Related Items?


General equilibrium ain’t just peanuts. With the tremendous shortfall in the peanut harvest (a decline of 17%) due to the unusually dry weather in peanut-growing states, people are expecting a rise in the price of this main input of peanut butter to cause supply to shift leftward. Jif peanut butter expects to raise its price by 30% starting in November.

I doubt that its sales will go down much—I think the demand for peanut butter is fairly inelastic. But what about related markets? If everyone likes peanut butter and mayonnaise sandwiches as much as I do—if peanut butter and mayonnaise are complements—then we’ll see a leftward shift in demand for mayonnaise, and its price will decline. Have I held too much of the ceteris paribus, or not enough? Where should one stop?

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  1. Mike B says:

    I seriously doubt we’ll see any change in the demand for mayonnaise because a peanut butter and mayonnaise sandwich sounds absolutely revolting.

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    • J S says:

      My six year old wanted to have one of those just last week. I thought it was a fluke. ..

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    • JM says:

      Yes, i agree. If anything the complement of Peanut butter should be strawberry jam, as peanut butter jelly sandwich is awesome, therefore the demand for strawberry jam should be the one that changes. However, since peanut butter is a necessity in life, the demand for it will not change even after a price raise.

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  2. Alex says:

    Ceteris Paribus, I think you’d be surprised how few people actually mix mayoinnaise with peanut butter…. Sounds awful. Talking economics: we might see fewer squirrels about.

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  3. 164 says:

    The market will work things out just fine. People like me have stockpiled peanut butter when Kroger and Albertsons had sales of namebrand jars for 99 cents. Those should last us through the year when a new crop come in. Expect fewer advertized specials at the grocery store and everything should be fine. Our stocks of coffee are getting low though!

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  4. Eric M Jones says:

    Now fresh strawberries dipped in melted peanut brittle…OMG!

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  5. jonathan says:

    We may see more demand for cheaper jelly because pb&j is the sandwich normal humans eat. Since there are many jellies, preserves, etc. on the market, it would be relatively easy to pay for a significant part of higher pb prices by lowering the &j cost.

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  6. Don says:

    My father would eat peanut butter and mayo sandwiches, but he could never convince me to try one. He did, however, teach me of peanut butter and pickle sandwiches, which I may like even more than PB&J. There’s something about that salty-sweet combination (think chocolate covered pretzel before you turn your nose up at it). Good crunch, too.

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  7. Speed says:

    America’s two most important food groups are mayonaise and bacon — peanut butter goes great with each alone and both together when served between slices of toast.

    Daniel Hamermesh said, “I think the demand for peanut butter is fairly inelastic.” Since the short run supply of peanuts is finite and limited by the failed crop, does that mean that peanuts will disappear from M&Ms, Butterfingers, baseball games and mixed nuts?

    How much is “fairly inelastic?”

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  8. BL1Y says:

    I suspect you won’t see much of a change in people’s peanut butter consumption habits, be it with mayo or jelly.

    What you may see is that people are spending less in completely unrelated areas. Maybe buying fewer iTunes because they have less discretionary funds leftover after paying more for food.

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