grapeandwinecycle

grapeandwinecycle - 1 1 Grape and Wine Cycles Four Examples...

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Unformatted text preview: 1 1 Grape and Wine Cycles Four Examples of Demand and Supply Jim Lapsley, Ph.D. UC Davis Extension University of California, Davis 1 2 2 Lecture Purpose Dem onstrate how shifts in dem and change the m arket. Prohibition WWII 1970s 1990s Explain how the delay in quantity supplied (planting) leads to boom /bust cycles that are predictable (at least after the fact) 2 3 3 The Production Cycle Quantity Supplied Exceeds Quantity Demanded Quantity Demanded Exceeds Quantity Supplied BoomTimes! High prices lead to new plantings Bust! Low prices discourage production 4 4 The Up Cycle Dem and increases for som e reason(s) Wineries raise prices and becom e m ore profitable Wineries seek to expand, bid up grape prices and offer planting contracts Growers start to plant, land prices increase 3 to 4 year lag before first plantings hit the m arket as wineencourages continued planting during this period 5 5 The Down Cycle Quantity supplied exceeds quantity dem anded Wine prices drop/wineries less profitable Grape prices drop/wineries want out of contracts Growers with high debt go bankrupt and vineyards are pulled Growers live with low prices until dem and and supply are in equilibrium 6 6 Manic-Depressive Wheel of Manic-Depressive Wheel of Fortune Fortune 7 7 In general, demand for wine has increased in the U.S. Quantity consum ed is a function of per capita consum ption and size of adult population U.S. adult population has increased over tim e (although in dem ographic waves) Per capita consum ption has also increased (although from a sm all base and has experienced periods of decline) 7 8 8 8 9 9 9 In 1919, with the passage of the 18th Amendment, In 1919, with the passage of the 18th Amendment, commercial production of alcohol for general commercial production of alcohol for general consumption and sale became illegal consumption and sale became illegal Prohibition ended commercial wine production But it increased demand for grapes 10 10 Why did demand for grapes increase?...
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This note was uploaded on 09/29/2010 for the course VEN 101C 91861 taught by Professor Davidsmart during the Spring '09 term at UC Davis.

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grapeandwinecycle - 1 1 Grape and Wine Cycles Four Examples...

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