In recent years the cost of producing wines in the U.S.has increased largely due to rising rents for vineyards.At the same time,more and more Americans prefer wine over beer.Which of the following best explains the effect of these events in the wine market?
A)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 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 price and an uncertain effect on the equilibrium quantity.
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

With the increase in rents for vineyards, the cost of producing wines in the US has increased, causing a leftward shift in the supply curve. Meanwhile, as more Americans prefer wine over beer, there has been a rightward shift in the demand curve. As a result, the equilibrium price has increased, but the effect on the equilibrium quantity is uncertain. Therefore, the best choice is D.

In Recent Years the Cost of Producing Wines in the U.S.has