Article - Rising prices of peanut butter (Oct 9)

CNN Money article suggests "Get your peanut butter -- before prices soar" ! After one of the worst peanut harvest seasons, price of peanuts is going to noticeably go up. The intense heat and drought that hit the southern U.S. this year cause that U.S. peanut production will only hit 3.6 billion pounds which is 13% less than last year according to Department of Agriculture Report released this week. Since there is less peanuts harvested the price is going to rise to $1200 per ton on peanuts. That's a huge jump from last year when it was only $450 per ton of peanuts. The rising prices of peanuts are also going to affect the companies that are making peanut butter. For example, Kraft will raise prices for its Planters brand peanut butter by 40% starting October 31. Another well-known company that makes peanut butter, ConAgra, expects to increase the price of its Peter Pan brand by more than 20%. Other companies are planning to increase the price of their peanut butters too. Even though the prices of peanut butter are going to dramatically rise, Marion Nestle, a nutrition professor at New York University, says that "a shift in peanut butter consumption shouldn't make a huge difference to the nutritional quality of most Americans' diets." She also says that "for the average person in America it would be a good idea to eat less of almost everything."

One of the things I learned from this article is to what extent can the price of resources affect the price of goods. Here we can see that now as the price of peanuts rose, the price of peanut butter is going to rise too. Moreover, I was really impressed that a slight rise of peanut price can cause that peanut butter is going to be nearly twice as expensive. Of course I knew that the price of peanut butter is going to go up but I would never think that it's going to rise to that huge extent.I also learnt that laws of supply work in real life too.

This topic closely relates to law of supply that we are now studying in class. The law of supply says that as the price increases the quantity supplied increases and as the price decreases the quantity demanded decreases too. It is also true that as the cost of resources changes there is going to be a shift to either right or left; to the right when the cost of resources decreases an to the left when it increases. This particular example of peanuts perfectly shows a shift to the left because the price of peanuts, the material used in peanut butter, rose so the price of peanut butter rises too. It also shows that peanuts and peanut butter have a positive relationship and as price of peanuts  increases the price of peanut butter increases too and as price of peanuts decreases the price of peanut butter decreases too.