My wife and I have wine with almost every dinner at home in Texas. We prefer Australian wines, because we have found European wines, especially Italian and French, to be high-priced in Texas. We even drink an occasional good Texas wine (yes, there are some!). The high prices have meant that we go through a bottle in three dinnershardly major drinkers! While visiting Germany we've been going through a bottle in two dinners onlya 50 percent increase in the quantity of wine consumed per night. I like to think it is due to substitution, to a move along the demand curve, as good European wines are incredibly inexpensive (I think) in Germany. For example, I bought a 2004 Barolo, one of the fanciest Italian wines I know, for 11 (about $15 these days), and I think it would have cost twice as much at home. But is our increased consumption due to the drop in price; or are we consuming more because our taste for wine has increased due to the joie de vivre of the European ambiance? I believe it's the formerI don't believe tastes change much; but my dilemma illustrates a common problem in empirical economics (and life generally), separating changes in amounts demanded from changes in demand. And, sadly, most non-economists will argue that behaviour like mine results from taste changes; too few people think prices matter.

Draw a graph of the author's demand curve for wine. Show what happens when he moves along the curve as a result of the lower price of wine in Europe. Now suppose that the change in the amount of wine consumed is due to the fact that living in Europe and drinking wine are complements. How would this change the demand curve?