GLOBAL WINE SHORTAGE

Global Wine Shortage

Global Wine Shortage

Law of demand and supply?

The law of demand and supply describes that how processes are set for the chosen commodities (goods and services). The law of demand and supply are inversely related to each other. They both intersect at a point called equilibrium point. The demand changes according to the consumers demand for goods. This shows that when demand is high, fewer products will be bought because the producers will increase the price of the product to earn more profits. However, this process that when prices are high then few consumers are able to buy the good. Supply has totally opposite effect as it shows the producers perspective, where the producer increases the supply accordingly so that more and more people are able to buy goods. It is just an imaginary assumption that the consumers will purchase more goods on fewer prices and less at high price. There are some inferior and normal goods which vary according to the consumer's needs and wants (What is economics, n.d.).

Why there is a wine shortage?

Half of the vine comes from Europe although, there are more than a million wine producers in the world but it isn't enough to fulfil the worldwide demand. The shortage has occurred due to lesser supply but higher demand globally. The production has fallen to more than 5% to its lowest level since 1960 because there are many bad weather seasons in Argentina and France. In 2012, the production fell by 10% in Europe though there was a 1% in crease in the consumption of the wine worldwide. The most demand and consumption is from the French, American and the Chinese. Their consumption rate is very high, as their economy has improved and their standard of living has been advanced since many years. Americans and Chinese produce wine themselves too but they aren't able to fulfil their demand of the country as reports dictate that America produces only 8% of the worlds wine though it consumes 12% of the world's wine. The bad and poor weather conditions have decreased the amount of production in major cities and country's from where wine was mostly produced. Though it has been illegal in many countries (Smith, 2013).

If there is an increasing demand, but the supply is decreasing, what would happen to the price of a bottle of wine?

There is an inverse relation of demand with supply. This proves that when there is a high demand of any good and the supply is less, than the price of that good will increase because of its shortage. It can be seen in the above diagram that when supply of wine will decrease from S1 to S2. This will eventually increase the price of wine from P1 to P2. The net effect will decrease the quantity of the wine consumption from Q1 to Q2 in the world. Per bottle price of the wine will increase eventually as the high price of the wine bottle can only be afforded by the ...