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Supply and Demand

Suppose you are the manager of a California winery...How would you expect the following events to affect the price you will receive for a bottle of wine?

a. price of comparable French wine decreases

b. 100 new wineries open in California

c. unemployment rate in the US decreases

d. price of cheese increases

e. due to new anti-shatter regulations enforced by the government the price of glass bottles increases

f. production costs can be decreased due to new wine making technology that has been discovered.

g.the price of wine vinegar (which is made from grape mash) increases

h. average age of consumers increases and older people drink less wine

I am essentially looking for any help with this problem in regards to potential formulas that could be used to help explain why and for more then just it will decrease or increase.

Solution Preview

Please find my answers below. There are no formulas to solve such questions. But you need a good understanding of supply and demand. I'll explain those with the answers below.

a. price of comparable French wine decreases
The comparable French wine is a substitute to your product. So if the price of substitute decreases, then the demand for substitute will increase and the demand for your product will decrease. As the demand curve shifts leftwards, the price of your wine will drop.

b. 100 new wineries open in California
The opening up of new wineries will increase the supply of demand. This increase in supply will shift the supply curve ...

Solution Summary

The solution evaluates number of possible scenarios for their impact on the supply and demand graph.