Demand and Supply of French and Australian Wines

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1) The market for the French wines is influenced by the forces of demand and supply.
The law of demand and supply explains the relationship between seller of a given
commodity and the buyer of the commodity .The relationship shows how the availability

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of the given good and the desire for that commodity has on its charge. The market for
French wines has been influenced by the little harvest. The inadequate yields have led to
decrease in supply of the commodity (Schulp, Lautenbach, & Verburg, 2014, p.
34). Decrease in the quantity of French wines causes the demand to increase. Increase in
demand leads to increased price and there is hence a movement along the demand curve
as shown below. The decrease in quantity causes the equilibrium to move from e to E1.
The prices also upsurge from Pe to P1.The demand will for French wines will reduce due
to increase price and hence they suppliers will at long run have to reduce the price so as
to make sales. The reduction in price will lower the equilibrium from E1 to the original
equilibrium e (Keating, Herrero, Carberry, Gardner, & Cole, 2014, p. 45).

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Price
Supply
Supply
Movement along
P1 E1
Pe equilibrium e
Demand
Quantity
Q1 Qe
b) The decrease in the quantity of a commodity supplied leads to a change in the
equilibrium price. A decrease in supply leads to excess demand at the initial price. Due to poor
harvest of the wine grapes, the price for the Australian wines has increased. The increase in the
price for Australian Wine caused the equilibrium to move from E to E1 as depicted in the above
diagram (Azevedo, et al., 2016, p. 56).
Question 2