Question

Question 296 pts

Question 3

In a market economy, prices act as signals that encourage resources like labor and capital to flow to their most valuable use – as if by the forces of an invisible hand.

Assume that a new study reveals the positive value of a glass of red wine with dinner for your health (!!!). Explain, using the supply and demand model, the effect of this finding on the markets for red wine and its substitute white wine.

What are some of the factors government considers (or at least, they should consider) before imposing any tax – sales, income, etc.?

Answer 1