Assume that California Merlot is a normal good.Prices of California Merlot 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 California 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 drop in prices for French oak barrels used for wine storage would lead to a decrease in the cost of production for California Merlot, resulting in an increase in supply. The rising consumer incomes suggest an increase in demand. As a result, the demand curve for Merlot has shifted to the right more than supply, leading to rising prices.

Assume That California Merlot Is a Normal Good