The U.S. Supreme Court ruled in May 2005 that people can buy wine directly from out-of-state vineyards. In the 5-4 decision, the Court held that state laws requiring people to buy directly from wine retailers located in the state violate the Constitution's commerce clause.
a. Suppose the market for wine in New York is perfectly competitive both before and after the Supreme Court decision. Use the analysis in Section 9.7 to evaluate the effect of the Court's decision on the price of wine in New York.
b. Evaluate the increase in New York consumer surplus.
c. How does the increase in consumer surplus depend on the price elasticity of supply and demand?