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21 December, 07:25

Buyers rush to purchase stocks in California vineyards following a forecast of a 30 percent decline in this year's grape harvest. What happens in the California wine market as a result of this announcement?

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  1. 21 December, 09:53
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    The demand curve for wine shifts to the right

    Explanation:

    As per the forecast, there should be a decline in grape harvest. This induces the buyers to purchase more quantity of grapes in an anticipation of decline in future harvest which would eventually make grapes costlier than now.

    Production of wine depends upon the availability of inputs. Grape being one of the necessary inputs. This means if in future, price of grapes rise, the production of wine would be costlier, which would raise the price of wine.

    As a consequence of such an announcement, the wine market would experience an immediate increase in demand for wine which would shift the demand curve to the right.
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