Question: Consider the following model of the market for peanut butter and jelly. The demand and supply of jelly is given by \({{Q}_{dj}}=60-3{{P}_{j}}-2{{P}_{pb}}\) and \({{Q}_{sj}}={{P}_{j}}\) and the demand and supply of peanut butter is given by \({{Q}_{dpb}}=85-3{{P}_{pb}}-2{{P}_{j}}\) and \({{Q}_{spb}}={{P}_{pb}}-5\)

a) Solve for the equilibrium prices and quantities in the two markets.

b) Suppose that a sudden shortage of peanuts emerges, increasing the cost of peanut butter. As a result, the supply of peanut butter contracts and becomes Qspb = Ppb – 11. What is the new general equilibrium? Briefly explain why the change in the supply of peanut butter affected the jelly market the way it did.