In the above figure, which of the following is a possible explanation for the re

Question

In the above figure, which of the following is a possible explanation for the reduction in the equilibrium value of the European euro from P2 to P1? 1) an increase in demand for French automobiles a decrease in the price of California wines, assuming that French wines and California 2) wines are substitutes 3) the European central bank's decision to buy euros on the world market an increase in the price of California wines, assuming that French wines and California 4) wine are substitutes e?@? ?

Explanation / Answer

In the diagram we see that the price of Euro has fallen from P2 to P1, which is reflected as the shift of demand curve from D2 to D1. A possible reason for the reduction in demand for euros is theis the likely reduction in the price of Californian wine. Because Californian wine is a substitute for French wine, when the California wine is cheaper its quantity demanded increases and the demand for French wine falls. Consumers now demand fever euros because they do not purchase as much French wine as they were before.

Option 2) is correct

Related Questions

Navigate

• Browse (All)
• Browse I
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.