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Wine Supply, Demand, and Pricing

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Supply, Demand, and Pricing
Supply, demand, and pricing have lasting effects on all products and services globally. If a product is in high demand (sometimes due to trends, prestige, or even necessity) the producer is able to jack prices for higher profit because consumers are willing to buy. However, if consumers are unwilling to purchase items for a higher price and are instead able to substitute with other products or services, than producers may again adjust prices so as not suffer from lack of sales.
The wine industry, an ancient industry, has seen significant changes simply in the last 50 years. The ability to create wine has been honed internationally and is used as a steady exportation product for many countries. For example, every state in the U.S. produces wine. This independence in wine manufacturing and the few limitations placed on its trade, have created an overproduction of wines globally. Winemakers and governments have attempted to restrict production in an effort to raise prices but with little success. This overabundance of available wines has affected the wine industry in two ways: booms in premium wine demand and mainstream wine supply.
With newly wealthy individuals of newly wealthy countries demanding only premium products, there has been a steady increase in the demand for first-class wines. As expected, winemakers have raised prices on ‘top shelf’ products knowing that consumers with the ability to pay top prices will do so. Like most basic supply and demand reactions, with higher prices comes lower production ultimately upping demand for consumers who are intent on prestige and reputation. Premium wines are also a common purchase as gifts to tout the success of the giver.
In wine particularly, it is not a simple matter to double output of products simply because of demand increase. Despite technological advances that support

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