Wine and Economics

Wine and Economics

Transacting the Elixir of Life

Denton Marks

What is distinctive about the economics of wine? Wine’s health benefits stir debate, but many appreciate life-enhancing qualities from its production and enjoyment. Few products enjoy such wide distribution, rich history, and interest. This book emphasizes microeconomic principles and related research – drawing upon various fields from international trade to public choice, relating economic reasoning to management. Topics range from economic fundamentals to the challenge of knowing what is in the bottle and the importance of wine as a cultural good.

Chapter 5: Some basic tools of economics: firm behavior, supply, and equilibrium in a market

Denton Marks

Subjects: development studies, agricultural economics, economics and finance, agricultural economics, environmental economics, international economics, public choice theory, environment, agricultural economics, environmental economics, water

Extract

An underlying theme of this book is transactions. Our closer look at the decision to transact has begun with the one most familiar to most of us, namely, buying and selling consumer goods such as bottles of wine. We have already discussed the consumer side of that transaction, and we turn now to the supplier of those goods. Who supplies the goods that consumers want? One way or another, they are producers—organizations (“businesses”) that acquire and manage productive resources from raw materials and employees to machines, land, structures, and advertising to produce and sell goods usually to make a profit which, for now, we consider to be sales revenues exceeding production costs. In this chapter, we analyze supply behavior and then put buyers and sellers together to see how the market works. While the demand side of markets tends to be relatively unorganized, industry structure on the supply side can make a difference, and we discuss that. We close the chapter with a discussion of the challenge of asymmetric information.

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