Supply price of wine. Q1-Q2 Supply 2 falls.

Supply is
defined as the willingness or ability to produce a good or service. Demand is
defined as the willingness or ability to consume a good or service.

Supply
of Wine Production Globally

We Will Write a Custom Essay Specifically
For You For Only $13.90/page!


order now

 

This article is
about the global wine production and how it’s affected by weather this year.
The article states that in the year of 2016 the global wine supply is predicted
to fall by 5% due to hail and frost and poor wine conditions overall. The
supply of wine is determined by Harvests are at their lowest levels since 2012.
Juliam Trustram Eve, who is the marketing director of English Wine Producers,
stated, “Overall, 2016 is looking to be a fantastic vintage for the UK”. She
also stated that they hadn’t had bad weather in the UK. According to the
article the French vineyards suffered from frost and hailstorms in the spring –
followed by drought in the summer which shaved 12 % of the volume produced.
Also, wine supply would be down by half in Brazil, and by 35% in Argentina. The
nations that were expected to have a rise in supply are the USA, Australia, New
Zealand, and Spain.

 

 

 

 

 

 

 

 

 

 

 

This diagram
shows that the global supply of wine has decreased. S1-S2 The supply curve
shifts to the left which means that there is a lower quantity supplied for
every given price of wine. Q1-Q2 Supply 2 falls. P1-P2. Price increases due to
the lack of supply. There would be excess demand prior to that because there
wouldn’t be enough supply to match the demand for wine. E1-E2 Equilibrium
decreased due to the falling supply of the good so that the new equilibrium is
where the demand and supply meet after the leftward shift of the curve. This
low supply has occurred due to the poor weather conditions in most countries,
which shaved the amount of wine produced. Some countries however, like the UK,
are set to benefit as they haven’t been affected by these poor weather
conditions. Most countries except the UK, Australia, New Zealand, and Spain
have decreased their supply of wine, due to hailstorms in the spring, and
droughts in the summer.

 

 

 

 

 

 

 

 

 

 

In this diagram,
the supply goes from being inelastic to elastic. Wine is stored in cellars and
that is why there is usually a surplus of wine. If there are poor weather
conditions such as in 2016, then there could be an increase in price due to the
shortage, which would lead to producers using the surplus to sell due to the
higher price.

The decrease of
the global supply of wine in late 2016 could be both a short term and a long term
issue. The extent to which this is an issue depends on weather in the future. If
these poor weather conditions continue, then the supply of wine will decrease
even further. That is because there could be a surplus of wine from the
previous years which may deplete due to continuously poor weather conditions,
which would lead to a shortage. In 2017 there could be perfect weather and
conditions for growing wine, which creates an excess amount of supply which enables
producers to produce more, lowering the price. Also if there are favorable
weather conditions then there might be a larger surplus than previously. In
most years, however, the supply of wine is balanced out, as in some countries
there is poor growing conditions, and in others there is rich growing
conditions. In the occurrence of that, the global supply is not going to
increase, or decrease by a lot. It’s going to stay relatively equal. There is
almost no way to solve poor weather conditions. It could become a larger
problem if such conditions continue occurring in prior years. Technological
enhancements in the production process can be a solution to a shortage of wine.
One of them could be growing wine with artificial light in closed spaces that
are indoors. This would solve the problem as the crops won’t be affected maintaining
production and output levels. This could however increase the cost of wine, as
it would create more expenses for the producer. This means that poor weather
conditions would most likely increase the price of wine globally, even if it’s
a slight increase. The global price would be affected short term because
weather conditions vary globally and within a few years there are usually good
harvests and bad harvests. This means that the price will not be affected in
the long term, and will most likely return to its usual equilibrium when there
is a year of excellent conditions.

Bibliography

Sky News, 2016. World
wine output near ‘lowest for 20 years’ as UK harvest looks good. Online

Available at: https://news.sky.com/story/wine-production-near-lowest-for-20-years-because-of-bad-weather-10624523
Accessed 24 January 2017.
 

 

 

 

 

 

 

x

Hi!
I'm Mack!

Would you like to get a custom essay? How about receiving a customized one?

Check it out