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    Effect of 4 events on the French wine market

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    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.

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    Solution Preview

    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 ...

    Solution Summary

    This solution uses the supply-demand model to predict the effects of four market events on the equilibrium price and quantity of French wine.