Saxum Vineyard, in Paso Robles, CA, is one of the more than 8,000 wineries in the...

  

Transcribed Image Text:

Saxum Vineyard, in Paso Robles, CA, is one of the more than 8,000 wineries in the United States. While Saxum produces a number of different kinds of wine, they focus their production on Syrah (also known as Shiraz). Saxum sells their wines all over the United States. Suppose you manage a vineyard like Saxum and want to determine how much you should charge for your Syrah. Suppose the market demand function for Syrah is as follows. Qo = 200-38.15Po + 8.35Ps - 2Pc + 10Inc+.8TS+.5M21 Where Qo is monthly demand for bottle of Syrah (in millions), Po is the price of Syrah in the market, P, is the average price of substitute bottles of wine (other varieties), Pc is the average price of a pound of cheese and is used to gauge the price of complimentary goods, Inc is average US income (in thousands), TS is the number of wine trade shows and competitions each year which firms can attend to market their wines, and M21 is the number (in millions) of millennials over the age of 21. This last variable is included to capture a change in consumer preferences; millennials are drinking wine at a much higher rate than previous generations. The market for Syrah also has supply, produced by wineries similar to Saxum Vineyard and your winery, which can be stated as follows. Qs = -100 + 22.95Po - 5PPI - 10Ps +8Temp + 1Sup Where Qs is monthly supply of bottles of Syrah (in millions), Po is the price of Syrah in the market, PPI is the Producer Price Index (an index used to gauge changes in the costs of production in the US), Ps is the price of substitute wines which could easily be produced instead of Syrah, Temp is the expected temperature during the harvest season for grapes, and Sup is the number of wineries supply Syrah in the market (in thousands). Using the information below, please answer the following questions. Saxum Vineyard, in Paso Robles, CA, is one of the more than 8,000 wineries in the United States. While Saxum produces a number of different kinds of wine, they focus their production on Syrah (also known as Shiraz). Saxum sells their wines all over the United States. Suppose you manage a vineyard like Saxum and want to determine how much you should charge for your Syrah. Suppose the market demand function for Syrah is as follows. Qo = 200-38.15Po + 8.35Ps - 2Pc + 10Inc+.8TS+.5M21 Where Qo is monthly demand for bottle of Syrah (in millions), Po is the price of Syrah in the market, P, is the average price of substitute bottles of wine (other varieties), Pc is the average price of a pound of cheese and is used to gauge the price of complimentary goods, Inc is average US income (in thousands), TS is the number of wine trade shows and competitions each year which firms can attend to market their wines, and M21 is the number (in millions) of millennials over the age of 21. This last variable is included to capture a change in consumer preferences; millennials are drinking wine at a much higher rate than previous generations. The market for Syrah also has supply, produced by wineries similar to Saxum Vineyard and your winery, which can be stated as follows. Qs = -100 + 22.95Po - 5PPI - 10Ps +8Temp + 1Sup Where Qs is monthly supply of bottles of Syrah (in millions), Po is the price of Syrah in the market, PPI is the Producer Price Index (an index used to gauge changes in the costs of production in the US), Ps is the price of substitute wines which could easily be produced instead of Syrah, Temp is the expected temperature during the harvest season for grapes, and Sup is the number of wineries supply Syrah in the market (in thousands). Using the information below, please answer the following questions.

Answer rating: 100% (QA)

a When the price of Syrah increases by ... View the full answer