Bob's winery sells bottles of their expensive, high-quality wine and a cheaper low-quality wine. Visitors have to drive 45 minutes to get to Bob's winery
Bob also sells his wine at a shop in the city where consumers don't have to drive a long distance and charges the same prices. Assuming the preferences of the clients that come to the winery and the city store are the same, explain why Bob tends to sell the expensive wine in a greater proportion in the winery than the urban store.
The relative price of expensive wine to cheap wine is smaller when adding on the fixed cost of driving to the winery. Thus, patrons at the winery will buy more expensive wines—this is a difference brought by a "substitution effect." It is possible that the income effect from driving has a countering effect, if wine is inferior, but wine is unlikely to have a large income effect because it is a small portion of a person's income.
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Which of the following statements best describes the expected pattern of trade imbalances?
a. The expected pattern of trade imbalances in the world economy has been that low-income economies will run trade surpluses, while middle and high-income economies will run trade deficits. b. The expected pattern of trade imbalances in the world economy has been that low and middle-income economies will run trade surpluses, while high-income economies will run trade deficits. c. The expected pattern of trade imbalances in the world economy has been that high-income economies will run trade surpluses, while low- and middle-income economies will run trade deficits. d. The expected pattern of trade imbalances in the world economy has been that low and high-income economies will run trade surpluses, while middle-income economies will run trade deficits.
When it is cheaper for one firm to produce a particular product, ____ exist(s).
A. economies of scale B. economies of scope C. diminishing marginal returns D. cross-subsidization
Refer to the above table. What is the absolute price elasticity of demand if a price falls from $7 to $6.50?
A. 0.85 B. 0.92 C. 1.17 D. 1.08
Economists who support market-based reforms for health care believe that increased competition among providers of health care would ________ costs and ________ economic efficiency
A) increase; increase B) increase; decrease C) decrease; increase D) decrease; decrease