Prices of BC Merlot wine (assume that this is a normal good )have risen steadily in recent years.Over this same period, prices for French oak barrels used for wine storage have dropped and consumer incomes have risen.Which of the following best explains the rising prices of BC Merlots?
A)The supply curve for Merlot has shifted to the right while the demand curve for Merlot has shifted to the left.
B)The demand curve for Merlot has shifted to the right more than the supply curve has shifted to the right.
C)The demand curve and the supply curve for Merlot have both shifted to the left.
D)The supply curve for Merlot has shifted to the right more than the demand curve has shifted to the right.

Question

Quizplus · Accepted Answer

The decrease in the price of French oak barrels could shift the supply curve of Merlot to the right, leading to an increase in quantity and a decrease in price. However, the fact that consumer incomes have risen indicates that the demand curve for Merlot has shifted to the right as well. If the demand curve has shifted to the right more than the supply curve, this would lead to an increase in both price and quantity, which is consistent with the rising prices of BC Merlot wine.

Prices of BC Merlot Wine (Assume That This Is a Normal