Question
A certain wine costs $3 a bottle to produce. It improves in taste if stored properly for a period of time. When it is newly
A certain wine costs $3 a bottle to produce. It improves in taste if stored properly for a period of time. When it is newly bottled, people are willing to pay only $2 a bottle to drink it. But the amount that people are willing to pay to drink a bottle of this wine will rise by $3 a year for the next 50 years. Storage costs, not including interest, are $.50 per year. If the interest rate is 5% and the wine is kept by rational investors, how old will it be when it is drunk and what will be its price at that time?
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Principles of economics
Authors: N. Gregory Mankiw
6th Edition
978-0538453059, 9781435462120, 538453052, 1435462122, 978-0538453042
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