Loneliness or Cheap Wine
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!