California Moon Drops (red grapes) and Washington Concord grapes are substitutes for juice. A drought in...
California Moon Drops (red grapes) and Washington Concord grapes are substitutes for juice. A drought in California destroyed a good portion of the grapes, ceteris paribus, we have ____,
A) the price of both Moon Drops and Concord and will fall.
B) the price of Moon Drops will fall, and the price of Concord will increase.
C) the price of both Moon Drops and Concord will increase.
D) the price of Moon Drops increase, the price of Concord will fall.
Homework Answers
ans C
due to drought supply of both grapes will fall. supply curve shifts leftwards. so prices are likely to go up. they may be substitutes but since drought destroys both kinds of grapes, the supply for both is likely to fall.
when supply falls and supply curve shifts left, there is increase in prices and reduction in equilibrium quantity
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