Suppose hail storms damage vineyards in South Australia.The supply of grapes to local winemakers declines.What happens to consumer surplus in the market for South Australian wine?
A)it increases
B)there is no change to the consumer surplus
C)it decreases
D)the overall effect is ambiguous as consumer surplus could rise or fall

Question

Quizplus · Accepted Answer

With the decrease in supply of grapes, the price of South Australian wine is likely to increase, leading to a decrease in consumer surplus. This is because consumers would have to pay more to purchase the same quantity of wine as before the hailstorm. Hence, the consumer surplus is expected to decrease.

Suppose Hail Storms Damage Vineyards in South Australia