Concepts of Economics and Their Implications

Running head: CONCEPTS OF ECONOMICS AND THEIR IMPLICATIONS
CONCEPTS OF ECONOMICS AND THEIR IMPLICATIONS
Name of the Student
Name of the University
Author Note

CONCEPTS OF ECONOMICS AND THEIR IMPLICATIONS1
Table of Contents
Answer to question 1:.................................................................................................................2
Part a:.....................................................................................................................................2
Part b:.....................................................................................................................................2
Answer to question 2:.................................................................................................................3
Answer to question 3:.................................................................................................................4
Answer to question 4:.................................................................................................................6
Answer to question 5:.................................................................................................................8
References..................................................................................................................................9

CONCEPTS OF ECONOMICS AND THEIR IMPLICATIONS2
Answer to question 1:
Part a:
As per the news reports, due to a poor harvest of wine-grape in France, there is a fall
in the supply of wine in the country. The diagram mentioned below explains the change in
market condition for French wines. A reduced supply of the main ingredient has led to a fall
in the supply of wines produced in France. This fall in input supply has shifted the supply
curve of final product SS in the left to SS’. There is a shift in the equilibrium from E to E’.
As a result, the price has increased to P’ corresponding to a fall in output to Q’. This
illustrates that the price of French wine can increase with a fall in its quantity.
Figure 1: Change in the market of French Wines in France
(Source: Created by Author)
Part b:
As explained in the above section, lower production has raised the price level of
French wines. This has transmitted a positive effect on the Australian wine producers. The
demand for Australian wines in France has increased its sales and elevated their revenue.
This can be explained with the help of a graph. Figure-2 pictures the rightward move in the
demand line, which is a result of an increase in demand for wines manufactured in Australia.