Answer to Question #102092 in Microeconomics for Patrick Palmer

Question

Land in Napa Valley California can be used either to grow red grapes for wine, or to grow Gala apples. Discuss what will happen to the market for Gala apples (i.e. the equilibrium price and quantity), if the Napa Valley red wines became, permanently, more popular.

Answer 1

When the red grapes becomes popular which means its market rises increasing its demand and quantity supplied in the market. Due to this increase in demand and quantity of red grapes ,the quantity of apples in the market drops due to decrease in quantity demanded. The equilibrium price of apples will decrease due to decrease of quantity demanded hence reduce in quantity supplied.

At equilibrium price:

Quantity supplied=Quantity demanded