Assume that in recent years the cost of producing microbrew beer in the U.S.has decreased largely due to technological improvements.At the same time,more and more Americans prefer microbrew beer over wine.Which of the following best explains the effect of these events in the microbrew beer market?
A)The supply curve has shifted to the right and the demand curve has shifted to the left.As a result there has been a decrease in the equilibrium quantity and an uncertain effect on the equilibrium price.
B)Both the supply and demand curves have shifted to the right.As a result,there has been an increase in the equilibrium quantity and an uncertain effect on the equilibrium price.
C)Both the supply and demand curves have shifted to the right.As a result,there has been an increase in both the equilibrium price and the equilibrium quantity.
D)The supply curve has shifted to the left and the demand curve has shifted to the right.As a result,there has been an increase in the equilibrium price and an uncertain effect on the equilibrium quantity.

Question

Quizplus · Accepted Answer

The decrease in production cost due to technological improvements causes a rightward shift in the supply curve. The increasing preference for microbrew beer over wine causes a rightward shift in the demand curve. Therefore, both the supply and demand curves have shifted to the right. This results in an increase in the equilibrium quantity of microbrew beer, but the effect on the equilibrium price is uncertain as it depends on the magnitude of the shift of both curves. Therefore, choice B is the best explanation.

Assume That in Recent Years the Cost of Producing Microbrew