Health Benefits of Red Wine

The publication of medical studies that suggest drinking red wine has health benefits caused an increase in the demand for red wine.  The quantity of red wine demanded increased at almost every possible price.  Graphically, this is illustrated by a shift of the demand curve for red wine to the right.  The effect of increased demand in the market for red wine was an increase in both the price of red wine and the quantity of red wine purchased and consumed.

Here is an overview of the medical studies that suggest there are health benefits to drinking red wine:

"It's thought that red wine, despite the alcohol content, also has helpful properties, like resveratrol and other polyphenols," says Barbara Shukitt-Hale, a research psychologist at the Jean Mayer USDA Human Nutrition Research Center on Aging at Tufts University in Boston.

Polyphenols are chemical compounds found in the skin of grapes and other plants. These compounds act as "antioxidants" -- the vitamins, minerals and enzymes in foods that protect the cells in your body from damage caused by the normal process of metabolism and ward off chronic disease. Resveratrol is a type of polyphenol found in red wine.

You could say that each serving that you have of a fruit or a vegetable — or perhaps a glass of wine — is beneficial, Shukitt-Hale reasons, as long as you don't forget that wine is alcohol, and you need to drink responsibly.

"You don't want to have seven glasses of red wine a day instead of seven servings of fruits and vegetables," she cautions.

One of most widely documented benefits of red wine is heart health. A pivotal study published several years ago in journal Nature found that red wine inhibited the synthesis of a protein called endothelin-1 that can lead to the development of atherosclerosis, a build-up of fatty material along the artery walls.

A November 2006 article in the academic journal Nature claims: 

Regular, moderate consumption of red wine is linked to a reduced risk of coronary heart disease and to lower overall mortality¹, but the relative contribution of wine's alcohol and polyphenol components to these effects is unclear². Here we identify procyanidins as the principal vasoactive polyphenols in red wine and show that they are present at higher concentrations in wines from areas of southwestern France and Sardinia, where traditional production methods ensure that these compounds are efficiently extracted during vinification. These regions also happen to be associated with increased longevity in the population.

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A Decrease in Demand

A decrease in demand is represented by a shift of the demand curve to the left.

Ceteris paribus, in the new equilibrium:

Supply is unchanged. (The supply curve did not move.)
Demand has decreased. (The demand curve shifted to the left.)

The quantity supplied decreased to the new equilibrium quantity.
The quantity demanded decreased to the new equilibrium quantity.
The equilibrium price decreased.

Total revenues (price multiplied by the quantity sold) are unambiguously smaller in the new equilibrium.

An Increase in Demand

An increase in demand is represented by a shift of the demand curve to the right.

Ceteris paribus, in the new equilibrium:

Supply is unchanged. (The supply curve did not move.)
Demand has increased. (The demand curve shifted to the right.)
The quantity supplied increased to the new equilibrium quantity.
The quantity demanded increased to the new equilibrium quantity.
The equilibrium price increased.

Shifts in Demand

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Market prices move up and down because of changes in the supply and demand for the particular product. The following example illustrates how a change in demand changes the equilibrium price.


Beef Market Example

Suppose a report on national television suggests that eating beef is bad for your health.
Would this affect the market price for beef? The report suggesting beef may be harmful causes the demand for beef to decrease. This means the DEMAND CURVE shifts left. No matter what the price of beef is, people want less of it. If nothing else changes, what has happened to the equilibrium price of beef?

Since the supply curve has not shifted and the demand curve has shifted left, the new intersection occurs at a lower price and smaller quantity than the initial equilibrium point. The published report caused the equilibrium price and quantity of beef to fall. (This was the basis of a lawsuit filed by representatives of the beef industry against talk show host Oprah Winfrey in 1997.)

The Income Effect

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The income effect refers to the increase in a consumer’s purchasing power when the price of a product decreases. Even though a consumer’s actual income does not change, a reduction in the price of a product leaves consumers with more money after the purchase of the product compared to the amount of money left when the product was more expensive. One of the things consumers might do with their increased purchasing power is buy more of this product.

Hamburger Example of the Income Effect
Suppose you have $5 in your pocket. If you go to McDonald's and Big Macs cost $3, then if you buy one Big Mac for lunch, you would have $2 left.
With that same $5 in your pocket, suppose you go to McDonald's and find Big Macs on sale for $1. If you buy one Big Mac for lunch, you now have $4 left. One of the things you might do with the “extra” money is buy another Big Mac.
In both of these cases, your monetary income is the same ($5). You have more purchasing power in the second case, however.

Demand

Demand is the relationship between various prices of a product and the corresponding quantity that consumers are willing and able to buy at each of those prices.

The quantity demanded is the amount that consumers are willing and able to buy at a particular price.

The law of demand states that, other things equal, the quantity demanded of a product decreases when the price of the product increases.

A demand schedule is a tabular representation of demand.


Price of a Hamburger Quantity of Hamburgers Demanded
$5 1
$4 2
$3 3
$2 4
$1 5
Table 1. An Example of a Demand Schedule

A demand curve is a graphical representation of demand. A demand curve can be a straight or curved line. It is traditional in economics to place price on the vertical axis and quantity on the horizontal axis. On the graph of a demand curve, the quantity demanded at a particular price is the horizontal distance between the vertical axis and the demand curve.





















Figure 1. An illustration of a downward sloping demand curve. Demand curves slope downward because there is an inverse relationship between price and quantity demanded due to income and substitution effects.

There is usually an inverse relationship between the price of a product and the quantity demanded of it.
• When a product becomes more expensive, consumers tend to buy less of it. Price increases are typically associated with a decrease in the quantity demanded.
• When a product becomes cheaper, consumers tend to buy more of it. Price decreases are typically associated with an increase in the quantity demanded.