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

Supply isdefined as the willingness or ability to produce a good or service. Demand isdefined as the willingness or ability to consume a good or service. Supply of Wine Production Globally   This article isabout 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 predictedto fall by 5% due to hail and frost and poor wine conditions overall. Thesupply 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”. Shealso stated that they hadn’t had bad weather in the UK. According to thearticle the French vineyards suffered from frost and hailstorms in the spring –followed by drought in the summer which shaved 12 % of the volume produced.

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Also, wine supply would be down by half in Brazil, and by 35% in Argentina. Thenations that were expected to have a rise in supply are the USA, Australia, NewZealand, and Spain.           This diagramshows that the global supply of wine has decreased. S1-S2 The supply curveshifts to the left which means that there is a lower quantity supplied forevery given price of wine. Q1-Q2 Supply 2 falls. P1-P2. Price increases due tothe lack of supply. There would be excess demand prior to that because therewouldn’t be enough supply to match the demand for wine.

E1-E2 Equilibriumdecreased due to the falling supply of the good so that the new equilibrium iswhere the demand and supply meet after the leftward shift of the curve. Thislow 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 weatherconditions. Most countries except the UK, Australia, New Zealand, and Spainhave decreased their supply of wine, due to hailstorms in the spring, anddroughts in the summer.           In this diagram,the supply goes from being inelastic to elastic. Wine is stored in cellars andthat is why there is usually a surplus of wine.

If there are poor weatherconditions such as in 2016, then there could be an increase in price due to theshortage, which would lead to producers using the surplus to sell due to thehigher price.The decrease ofthe global supply of wine in late 2016 could be both a short term and a long termissue. The extent to which this is an issue depends on weather in the future. Ifthese poor weather conditions continue, then the supply of wine will decreaseeven further. That is because there could be a surplus of wine from theprevious years which may deplete due to continuously poor weather conditions,which would lead to a shortage. In 2017 there could be perfect weather andconditions for growing wine, which creates an excess amount of supply which enablesproducers to produce more, lowering the price.

Also if there are favorableweather conditions then there might be a larger surplus than previously. Inmost years, however, the supply of wine is balanced out, as in some countriesthere is poor growing conditions, and in others there is rich growingconditions. In the occurrence of that, the global supply is not going toincrease, or decrease by a lot. It’s going to stay relatively equal. There isalmost no way to solve poor weather conditions.

It could become a largerproblem if such conditions continue occurring in prior years. Technologicalenhancements 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 thatare indoors. This would solve the problem as the crops won’t be affected maintainingproduction and output levels. This could however increase the cost of wine, asit would create more expenses for the producer. This means that poor weatherconditions would most likely increase the price of wine globally, even if it’sa slight increase. The global price would be affected short term becauseweather conditions vary globally and within a few years there are usually goodharvests and bad harvests. This means that the price will not be affected inthe long term, and will most likely return to its usual equilibrium when thereis 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.