What will be the effect of the following events on the market for French wine and the quantity consumed? Distinguish between the short-run and the long-run impact.
a) A new study linking longevity with moderate amounts of red wine.
b) An increase in the price of Californian wine.
c) A severe drought in the wine growing regions of France.
d) A subsidy to French vineyards.
a) People will want to drink more red wine. The demand curve will shift to the right. Price and quantity will increase. The impact will be long-run.
b) People will switch from ...
This solution uses the supply-demand model to predict the effects of four market events on the equilibrium price and quantity of French wine.