Question

A recent study suggested that moderate wine drinking may actually benefit one's health. If this information leads to an increased demand for wine, we would expect A. both the price and quantity of wine sold to decrease. B. the price to increase and the quantity of wine sold to decrease. C. the price to decrease and the quantity of wine sold to increase. D. both the price and quantity of wine sold to increase.

Answer 1

D. both the price and quantity of wine sold to increase

Step-by-step explanation:

The law of demand states that the higher the price, the lower the quantity demanded and vice versa.

However, the above law may not be applicable where consumers have high demand for certain products due to health benefit. For a product that has high demand due to survey conducted on health, the price and quantity supplied will increase because producers or suppliers will take advantage of such situation in order to further increase the profit accruable to them.

Consumers would have no further choice than to purchase them despite the price increase while suppliers will be willing to supply more in order to have more profit.