Effect of French Wine Market on Australian Wines in France

BEO 1105 1
BEO 1105
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BEO 1105 2
Question 1
According to the EU department for Agriculture, adverse weather conditions such as
heavy hailstorms, frosts and drought facilitated a low harvest historically as evidenced in 2017
(French, 2017). Due to the adverse climatic conditions witnessed across Europe, most of the
wine-growing regions faced a low yield. This led to France winemakers anticipating a reduction
in their production. The low harvest meant that the supply of wine reduced drastically, thus
reducing wine production. Thus, such a low supply means that there will be high prices for
French wine.
i)How a change in the French wine market affect the market for Australian wines in France
The adverse weather conditions translated to a poor harvest, which has an effect of
lowering the production of wine. This means that the supply of wine in the market will reduce
triggering an increase in the prices of wine. An increase in the price of French wine leads to a fall
in demand for such wine in the market compared to other wines from different countries.
French wine and Australian wines are substitute products. The increase in demand for
one substitute product translates to a decline in the demand for the other substitute product. In
the context of French wine, the poor harvest means a decline in supply, thus translating to high
prices. On the other hand, the Australian wine will be in demand leading to an increase in
demand due to low prices charged compared to French wine.
Question 2

BEO 1105 3
Apple has been reputed for producing high-quality products with amazing and excellent
features. However, despite the high prices charged for Apple products, people continue
purchasing them in bulk. The demand for Apple products increases with price increments, and
this makes them match the definition of a Veblen good. A Veblen good is a commodity whose
demand rises as the price increases since people perceive higher price is a mark of great status.
The reason why people purchase more with price increases, particularly with Veblen
goods since they are of the view that the more expensive goods get, then the superior the quality
and some individuals purchase more. It is worth noting that Apple products fit the description of
a Veblen commodity. The demand curve for a Veblen commodity slope in the opposite direction.
Thorstein Veblen is the man behind Veblen goods. Thorstein was an unorthodox economist who
discovered the conspicuous consumption where he postulated that the motivation for purchasing
products was to show off to people in the society.
Question 3