question archive Consider the market for grapes
Consider the market for grapes
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Consider the market for grapes. An increase in the wage paid to grape pickers will cause the:
a) demand curve for grapes to shift to the right, resulting in a higher equilibrium price for grapes and a reduction in the quantity consumed.
b) demand curve for grapes to shift to the left, resulting in a lower equilibrium price for grapes and an increase in the quantity consumed.
c) supply curve for grapes to shift to the left, resulting in a lower equilibrium price for grapes and a decrease in the quantity consumed.
d) supply curve for grapes to shift to the left, resulting in a higher equilibrium price for grapes and a decrease in the quantity consumed
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The correct option is d) supply curve for grapes to shift to the left, resulting in a higher equilibrium price for grapes and a decrease in the quantity consumed.
When the wages rise, grape suppliers find their costs going up. This increase in costs means that lesser grapes are supplied at all prices or, rather, a higher price is required at all levels of grapes supplied to cover the extra cost. The supply curve shifts to the left and meets the demand curve at a higher point. This raises the price in the market while the quantity supplied falls.
