Prices of California 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 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 decrease in the price of French oak barrels and the increase in consumer incomes indicate that the supply of Merlot has increased and the demand for it has also increased. However, the fact that the price of Merlot has risen steadily means that the increase in demand has outpaced the increase in supply. Therefore, only B is a plausible explanation.

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