The lure of spices during the medieval period wasn’t driven merely by the desire to improve the taste of food (Europe produced saffron, thyme, bay leaves, oregano, and other spices for that). The lure of nutmeg, mace, and cloves came from their mystique. Spices became a symbol of prestige (just as Louis Vuitton and Ferrari are today). Most Europeans didn’t even know that they grew in the tiny chain of islands called the Spice Islands today.
a. Suppose you grow much of the spices in the Spice Islands. Knowing that few people could compete with you, how would you adjust your production to maximize your profits?
b. Suppose you heard rumors that the Europeans to whom you often sell are also becoming fascinated by the mechanical clock, a new invention that was spreading across Europe as a new novelty and as yet another symbol of prestige. How would this change your optimal production? Why?
c. Once Europeans made contact with the Americas, a new, high-status novelty arose: chocolate. Was this good news or bad news for you, the monopolist in the Spice Islands?