I’m alone in Europe, living in an apartment and cooking for myself. I bought a bottle of decent red wine for the remarkably low price of $2.99 and am consuming about one-fourth of it with each dinner (instead of the one-fifth or one-sixth of a bottle I would drink with each dinner at home).
Have I substituted toward wine, moving down the demand curve because the price is lower than at home? Or am I drinking more because I am alone and miss my wife? has my demand curve for wine merely shifted out due to my solitary lifestyle?
This question illustrates a general problem in economics: when quantity consumed increases, is it because relative price has dropped or because demand has increased? One needs more information than I have here; but being a Chicago-type economist, I’m convinced the relative price has altered my behavior.
Unfortunately, I am too foggy from the wine to sort out the answer!
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Do you really need an excuse to drink more wine?
It could be a larger glass. 1/4 a bottle isn’t much to begin with, much less substantially different than 1/5 or 1/6.
Maybe you just have a bigger glass, and you’re filling it to the same relative point.
maybe the original bottle cost 5/4ths or 6/4ths as much and somehow your satisfaction comes from drinking a certain financial amount of wine? you could enjoy really expensive wine with an eyedropper.
Oh, to think like an economist. Both a blessing and a curse.
Maybe the wine you got in Europe is better.
Either way, there are a lot of variables in this matter.
Are the two explanations necessarily mutually exclusive?
Maybe it’s the elimination of your wife’s disapproving scowl as you reach for the third glass that liberated your behavior – one particular non-monetary cost has been eliminated.