In recent years the cost of producing wines in the U.S. has ...

[mia]

In recent years the cost of producing wines in the U.S. has increased largely due to rising rents for vineyards. At the same time, more and more Americans prefer wine over beer.
 
  Which of the following best explains the effect of these events in the wine market?
  A) The supply curve has shifted to the left and the demand curve has shifted to the right. As a result, there has been an increase in the equilibrium price and an uncertain effect on the equilibrium quantity.
  B) Both the supply and demand curves have shifted to the right. As a result, there has been an increase in the equilibrium price and an uncertain effect on the equilibrium quantity.
  C) The supply curve has shifted to the left and the demand curve has shifted to the right. As a result there has been an increase in the equilibrium quantity and an uncertain effect on the equilibrium price.
  D) Both the supply and demand curves have shifted to the right. As a result, there has been an increase in both the equilibrium price and the equilibrium quantity.

Question 2

President Bush lowered income taxes for individuals in 2001. Explain how lower income taxes affect the aggregate demand curve.
 
  What will be an ideal response?

[Zebsrer]

Answer to Question 1

A

Answer to Question 2

Lowering the income tax increases the amount of disposable income available to households. Higher disposable income increases consumption at every price level. The result is a shift in the aggregate demand curve to the right.

[mia]

TYSM

[raenoj]

Excellent