Studies have shown that drinking one glass of red wine per day may help prevent heart disease.Assume this is true,and a fungal disease destroys a large portion of the grape harvest of California vineyards.In the market for red wine,these two developments would
A)increase demand and increase supply,resulting in an increase in the equilibrium quantity and a decrease in the equilibrium price of red wine.
B)increase demand and decrease supply resulting in a decrease in both the equilibrium quantity and the equilibrium price of red wine.
C)increase demand and decrease supply,resulting in an increase in the equilibrium price and an uncertain effect on the equilibrium quantity of red wine.
D)increase demand and decrease supply,resulting in an increase in both the equilibrium price and the equilibrium quantity of red wine.

Question

Quizplus · Accepted Answer

The news about the health benefits of red wine would increase demand for it, while the fungal disease reduces the supply. This would cause an increase in the equilibrium price of red wine, but the effect on the equilibrium quantity is uncertain as it depends on the extent of the decrease in supply and the extent of the increase in demand.

Studies Have Shown That Drinking One Glass of Red Wine