Funny things you've overheard about beer

not all "we" would

 

LOL, I understand economics just fine, hence my statement. Yes the value of something, defenitly has something to do with price of making it, saying otherwise is absurd.

Try looking at a Mexican market, your can get 6-8 threads of saffron for $10.

 

Except that its not actually saffron

 

I think you're confusing "value" with "sale price." Not to be a nit-picker or anything

 

The cost to make something is only relevant to how profitable a business is. Businesses can't charge whatever they want for their products, they have to be able to make them for less than what people value them at.

Why aren't pencils made out of solid gold and priced accordingly? Because no one would buy them, which means their value is low even though their cost is high.

Imported beer isn't priced higher because it costs more to import it. It's imported because people here are willing to pay more for it. And we'll see that change as people realize domestic beer is worth paying more for. Imported beer will drop in price but many on this thread will conclude that shipping suddenly got cheaper. And if the value of imported beer drops below the cost to make and ship it then imported beer will largely disappear and people here will conclude that ships don't exist anymore.

This thread could appear in an economics forum titled "Funny things you hear people say about economics". ;-)

 

People have also been purchasing "limited edition" metal Starbucks gift cards with $50 on them for over $1000 on ebay (wish I was making this up).

Value is quite high even though he cost to make is very low.

 

LOLWUT?

People are so stupid. I hope no one on this forum bought one of those...

 

Why are they stupid? Because YOU don't value it? Update: the cards actually had $400 on them and also gave other benefits and were sold for $450 by Starbucks. One person paid $1000 on eBay for one. http://money.cnn.com/2012/12/10/news/companies/starbucks-card-ebay/

I bet lots of people here pay prices for beer that a lot of people think is stupid. A man dying of thirst in the desert would happily pay $100 for the last bottle of water. Is he stupid too? I'd say he'd be stupid not to pay it.

 

Totaly agree someone would knock me for buying a $20 750ml of beer. And i knock them for buying 100 dollar pair of jeans. Its all relative.

Having heard anything funny about beer lately, but I do have a biddy getting off BMC and liking good beers. But he always says everything has a hoppy bite. Im thinking hes jist trying to explane what he's tasting even tho that hefe has a hoppy bite. but at least hes off BMC.

 

Not to be a dick, but that's not exactly how "economics" works. At a competitive market equilibrium (which I think you can make a case for the BMC market being close to), the price of a good IS directly tied to the cost of production; specifically, price will equal the long-run marginal cost of production, which also equals the long-run average cost of production. You're right in your point that price is also tied to demand (the reason economists love markets so much is that they're a tool for equating supply and demand), but that doesn't change the fact that the price charged for a good is directly tied to the cost required to make it.

Your example about saffron beer is a little bit of a different case, since that would be a differentiated good (as most craft brews are) that's only produced by one place--for example, only one brewery makes Pliny the Elder, and no one else can really copy it. In that case, price doesn't need to be equal to marginal cost, but it's still connected to it. It's a little more complicated but I'm sure you're not that interested in the explanation.

All that to say that yes, all else equal, beers that require costlier inputs (like those with higher ABV) should cost more. According to economics.

 

Value is extremely subjective, if I think a $14 4 pack is the best beer in the world then its a great value, if its just OK its a rip off. But to price a 4.7% wheat beer the same as a 9% IIPA when the price of ingredients are 1/3 the cost is crazy, and a bad value (to me).

 

Unless the profit margin of the wheat beer is subsidizing a smaller profit margin on the IIPA.

 

You have it backwards. A business can afford to sell a product for the marginal cost to make it so they will continue to do it. But if their costs suddenly increase (hop prices go up) they can't just charge more, they will stop making it or go out of business. You seem to think every consumer is standing there in aisles looking at products and quickly summing the manufacturing costs to see if they should buy the product.

Brewers making higher ABV beers know people will pay more for them so they make them. They don't just make any beer they want and force people to buy it. Again, if they could they'd increase their costs to charge more. Yet they are always working to lower their costs. Are they idiots?

Btw, saying "...but I'm sure you're not that interested in the explanation" is being a dick.

 

Troy, this just isn't correct. Your example about imported beer provides a good example of why. If imported beer consistently commanded a higher price in the market than the opportunity cost of producing it, import breweries would consistently produce what we economists think of as "economic profit" (distinguished from financial profit, in that economic profit is returns to a given activity that are greater than what could be gained by using the resources used in that activity in the next best alternative). In other words, they'd be making more profit than everyone else, adjusting for risk and any other factors that affect the return on investment. If that were the case, more people would want to get involved in brewing in Germany, Belgium and wherever else, drawn by the inordinate profits of those brewers. Eventually, more producers would enter the market, and when supply increases, all else equal, price declines. In the long run, price would equilibrate where the marginal benefit (the benefit experienced on the last unit of beer bought) was equal to its marginal cost (the cost of the resources used to produce that last unit). And both of those would be equal to the price.

So there's no reason to believe that import breweries command higher prices just because people "like them more." And it is certainly the case that the resources required to produce a German/Czech/Dutch/Belgian/British beer and bring it to your store is greater on average than what is required to do so for an American beer. And yes, that does in fact cause the price to be higher. It's not part of some grand conspiracy, and it's not due to how stupid Americans are, thinking imports are better than domestics.

You're right, of course, that if demand for imported beer decreased relative to demand for domestic beer, it would have less market share. But that doesn't mean that they cost the same to produce for the US market...on the contrary, a smaller number of people who are still willing to buy imported beer even though it costs more will still do so, and the total quantity in the market will decrease (but not disappear).

I'm really not trying to be a douche about this, but you sound so certain of yourself and yet you're quite wrong...

 

OK, I just didn't think you wanted a big soliloquy about how under monopoly conditions the equilibrium point is reached where marginal revenue is equal to marginal cost, and price is a function of demand but not supply...do you want me to attach graphs and show why this is the case?

Seriously, I'm trying to be helpful, but the chip on your shoulder makes it a little hard to do so in a good spirit.

 

where'd the funny beer things go?

 

Let's take your example of an increase in a major input--hops.

If that happens, the marginal cost curves will go up for all breweries that use the input. This would cause the supply curve for beer to shift upwards, reducing the quantity of beer that is sold at equilibrium. And the price will increase, unless demand for beer is completely inelastic, which there's no reason to believe that it is. The new equilibrium price (like the old price before it) will be where price is equal to the marginal cost of producing the last unit of beer, which is simultaneously equal to the marginal benefit of the last consumer.

I drew some quick graphs that illustrate the case, sorry couldn't figure out how to put them directly in the post. One is before the price increase, the other is after the price increase. Hope that clears it up for you.

 

Oh never mind they got in there anyway.

 

Sorry everyone else I know this is waaay less fun and interesting for you all than it is for me--I do this for a living, and I love it. I was trying not to go into the weeds on this. My New Year's resolution is going to be to not argue with anyone on HBT, no matter how wrong I think they are, for at least a month.

But I don't have to start that until Jan. 1!

 

Funniest thing I heard about beer today?

2 guys bitttching about the economics and pricing of beer and distribution. We all make our own so who cares!?

 

You have it backwards. Under a monopoly, marginal cost is not equal to price, monopolies can charge much higher prices. You mean the opposite of a monopoly: a commodity.

So your theory is that there is a situation where supply doesn't affect the price. So it wouldn't matter if only one bottle of Pliny the Elder was produced per year or if the supply was so high that bottles of it were falling from the sky. People would pay the exact same price for it in both cases because the manufacturing costs are the same? Please show me your graphs that prove this.

 

This was on a major question answering site. I like the "Tip" at the end!

Best Answer - Chosen by Asker
A "quarter barrel" or Pony Keg is about 7.5 US gallons (Pony kegs are half the normal sized beer keg and a quarter of a barrel), and will provide approximately 80 12 oz. glasses or beer mug of your favorite beer.
FYI:
A Keg is a small cask o barrel with a capacity of about 31 US gallons (117 litters), a keg is also known as a "Full Keg" or Barrel.
A half keg or half barrel is 15.5 US gallons , this container is the normal size of a beer keg and will provide approximately 160 12 oz. glasses or beer mug of your favorite beer.
Tip: Don't buy a half-barrel unless you're having 150-200 people and know that, at least half of them are beer drinkers!

 

Ditto! I'm loving it. Thank you for posting good economics. It's a scarce asset these days.

If only 1 bottle were produced, you'd have a scarce asset which would earn economic profit.
Economic profit attracts entrants...then more than 1 bottle is produced until economic profit goes to 0.
That point, in competitive market is P=MC
Brewers won't produce if P<MC, and if P>MC new entrants come until until P=MC

If P<>long run avg cost, then it's a) bankrupt or b) market power/monopoly

Sure, demand moves price in the short run, but in the long-term prices are a function of production costs.

 

Listen, re-read the post you quoted me on: I never said that in a monopoly marginal cost is equal to price, I said marginal cost is equal to marginal revenue. Absolutely monopolies charge prices that are higher than marginal cost, which is one reason that we don't like them.

Not only is this whole conversation really off-topic, I'm sure it's bumming everyone else out. I'm happy to PM you with all kinds of discussion on microeconomic theory, let me know if you'd like to continue that way.

Either way, I think I'll call it quits on here so we can all go back to laughing at those who don't know a roggenbier from a RIS.

 

Cheers mate! I don't often get to expound on my own area of expertise on the brew forums, hard to pass up the opportunity when it presents itself. If only I were a chemist, or an electrical engineer--those guys have all the fun on this site!

 

Dammit college made me take economics I come here for fun. Hey what do you call someone that is good at math and nothing else in college? An economics major. Ba-zing.

 

Ouch. Unfortunately it's worse than that. Economists are mostly mathematicians who couldn't cut it in number theory...

On a more serious note, everyone looking for more sober, well-thought out discussion of issues pertinent to homebrewing should really read this thread.

You're welcome.

 

Or have a CO2 setup and really like the beer. With the old pump taps it will be oxidized terribly within the week

 

EPIC ECONOMIST RAP BATTLES OF HISTORY!!!

 

KEYNES...versus....SMITH. FIGHT.

I would totally listen to that...

 

Ah had it backwards. Thanks!

 

http://m.youtube.com/#/watch?feature=fvwrel&v=d0nERTFo-Sk

 

True, but as economists like to say, in the long-term we're all dead. You are assuming we're already in the long-term but we're not. And the fact that beer is still a profitable business proves that. Profit is not fixed, some breweries are more profitable than others and not just because their costs are lower.

 

Oh my god this is amazing... :rockin:

 

tl;dr. Back to beer stuff. So this guy walks into a bar, and then, well, he orders a beer.

I think I missed the punchline.

 

Beer?! I thought you wanted a Bud Light!

Wait. That might be backwards.

 

It's getting dismal in here...

 

A buddy of mine that only drinks bud light refers to ying ling as ding ling.

 

I just missed this whole econ part and I'm pissed. I am a fellow econ major and missed this discussion. Fortunately I'm drunk and do not wish to restart the argument. Go economics!

 

"where'd the funny beer things go?"