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SUPPLY & DEMAND

Supply and demand is one of the most fundamental concepts of economics and is the backbone of a market economy. Demand refers to how much (quantity) of a product or service is desired by buyers.

The quantity demanded is the amount of a product people are willing to buy at a certain price; the relationship between price and quantity demanded is known as the demand relationship. Supply represents how much the market can offer.

The quantity supplied refers to the amount of a certain good producers are willing or able to supply when receiving a certain price. The correlation between price and how much of a good or service is supplied to the market is known as the supply relationship. Price, therefore, is a reflection of supply and demand.

The concept of supply and demand is fundamental to fine wine investment. Fine wine is an improving asset, because of the combination of a winery producing a limited quantity each vintage and the consumption increasing as it ages and matures, thus creating the inverse supply curve that drives prices of fine wine upwards.

"While it is hard to find totally accurate records and therefore data, it is fair to say that the prices for the very best wines have risen by an average 15 per cent a year over the past 25 years"

suggests Joss Fowler, a Fine Wine Manager at London merchant Berry Bros & Rudd.

"That includes quiet periods for example, from 1998 to 2002 being more than balanced out by the busy ones, like 2005-07."

     
         
         
         

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