You have to analyze the economics of the situation and explain it to potential investors in Napa Valley Wines. What affect on the supply side of the market have the fires had? What affect on the demand side of the market is the heart research likely to have? What can be concluded about the market prices of Napa Valley reds? Will they increase, decrease or are they indeterminate? What can be concluded about the quantity exchanged on the market? Will it increase, decrease or is it indeterminate? A starting price/quantity graph is provided. You can add the demand and supply curves representing your solution to it. Be sure to explain your graphics in the written part following.
September, 2017, over twenty wildfires devastated over 5000 homes, businesses, and institutions in Northwestern California. Many acres of NAPA Valley grapes and several small wineries were destroyed. Wine enthusiasts believed there would be a sharp decrease in the size of the Fall Napa Valley grape harvest. Seemingly this would not affect the market for red wines too much because there should be many substitutes from stocks around the world. However, this disaster has occurred at a particularly unfortunate time. An increasing number of research studies have concluded that red wine produced from NAPA Valley grapes is instrumental in promoting healthy heart longevity relative to red wine produced from other sources. This phenomenon is attributed to the unique microclimate and soil conditions found in NAPA Valley.
You have to analyze the economics of the situation and explain it to potential investors in Napa Valley Wines. What affect on the supply side of the market have the fires had? What affect on the demand side of the market is the heart research likely to have? What can be concluded about the market prices of Napa Valley reds? Will they increase, decrease or are they indeterminate? What can be concluded about the quantity exchanged on the market? Will it increase, decrease or is it indeterminate? A starting
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