Question

According to an article on the wine market in the Wall Street Journal, "many farmers in recent years stopped planting new [grape] vines, and some even switched to nuts, vegetables, and other fruit." But at the same time, "Americans kept drinking more wine." The equilibrium price of wine will

a. increase
b. decrease only if demand increases more than supply decreases
c. decrease
d. increase only if demand increases more than supply decreases

Answer 1

c. decrease. The equilibrium price of wine will decrease when supply decreases and demand increases.

Step-by-step explanation:

The equilibrium price of wine will decrease.

According to the information given, many farmers have stopped planting new grape vines and have switched to growing other crops. This implies that the supply of grapes used to produce wine has decreased. However, the article also mentions that Americans have continued to consume more wine, indicating an increase in demand. When supply decreases and demand increases, the equilibrium price of wine will decrease. This is because there is less supply available, but the demand remains high, causing prices to fall.