Assume that microbrewery beer is a normal good.Prices of microbrewery beer have risen steadily in recent years.Over this same period, prices for fermenting vats used in beer making have also risen and consumer incomes have fallen.Which of the following best explains the rising prices of microbrewery beer?
A)The supply curve for microbrewery beer has shifted to the left while the demand curve for microbrewery beer has shifted to the right.
B)The demand curve for microbrewery beer has shifted to the left more than the supply curve has shifted to the left.
C)The demand curve and the supply curve for microbrewery beer have both shifted to the right.
D)The supply curve for microbrewery beer has shifted to the left more than the demand curve has shifted to the left.

Question

Quizplus · Accepted Answer

The rise in prices for microbrewery beer can be explained by the fact that prices for fermenting vats used in beer making have also risen, implying a rise in the cost of production. Additionally, consumer incomes have fallen, which implies a decrease in the demand for the product. Therefore, we can expect that the supply curve for microbrewery beer has shifted to the left more than the demand curve has shifted to the left, resulting in the rising prices of microbrewery beer. Thus, choice D is the correct answer.

Assume That Microbrewery Beer Is a Normal Good