studies have shown that drinking one glass of red wine per day may help prevent heart disease. assume this…

studies have shown that drinking one glass of red wine per day may help prevent heart disease. assume this is true, and favorable weather has increased the grape harvest of california vineyards. in the market for red wine, these two developments would a. increase demand and decrease supply, resulting in an increase in the equilibrium quantity and a decrease in the equilibrium price of red wine. b. increase demand and increase supply, resulting in an increase in both the equilibrium price and the equilibrium quantity of red wine. c. increase demand and increase supply, resulting in an increase in the equilibrium quantity and an uncertain effect on the equilibrium price of red wine. d. increase demand and increase supply, resulting in an increase in the equilibrium price and an uncertain effect on the equilibrium quantity of red wine.

studies have shown that drinking one glass of red wine per day may help prevent heart disease. assume this is true, and favorable weather has increased the grape harvest of california vineyards. in the market for red wine, these two developments would a. increase demand and decrease supply, resulting in an increase in the equilibrium quantity and a decrease in the equilibrium price of red wine. b. increase demand and increase supply, resulting in an increase in both the equilibrium price and the equilibrium quantity of red wine. c. increase demand and increase supply, resulting in an increase in the equilibrium quantity and an uncertain effect on the equilibrium price of red wine. d. increase demand and increase supply, resulting in an increase in the equilibrium price and an uncertain effect on the equilibrium quantity of red wine.

Answer

Brief Explanations:

The health - benefit news will increase the demand for red wine. The favorable weather increasing grape harvest will increase the supply of red wine. When both demand and supply increase, the equilibrium quantity will definitely increase. However, the effect on the equilibrium price depends on the magnitudes of the shifts in demand and supply. If the increase in supply is larger than the increase in demand, the price will fall; if the increase in demand is larger than the increase in supply, the price will rise; if they are equal, the price will remain the same. So the effect on the equilibrium price is uncertain.

Answer:

C. increase demand and increase supply, resulting in an increase in the equilibrium quantity and an uncertain effect on the equilibrium price of red wine.