Consider the markets for butter (B) and margarine (M), where the demand curves are Q = 20 - 2PM + PB and Q = 60 - 6PB + 4 PM and the supply curves are QM = 2PM and QB = 3PB.
a) Find the equilibrium prices and quantities for butter and margarine.
b) Suppose that an increase in the price of vegetable oil shifts the supply curve of margarine to QM = PM. How does this change affect the equilibrium prices and quantities for butter and margarine? Using words and graphs, explain why a shift in the supply curve for margarine would change the price of butter.