Champagne Data Response

Read the article here

Part A

i) Demand: quantity of a good or service a consumer is willing and or able to buy at a certain price at a certain time period.

ii) Supply: quantity of a good or service a supplier is willing and or able to supply at a certain price at a certain time period.

Part B

As shown in Figure 1, the pries of a bottle of champagne has fallen due to the decrease in consumer’s willingness to buy champagne from D1 to D2. This can be seen on figure 1 from the shift in quantity (Q1 to Q2) which causes a shift in price (P1 to P2), which then will affect the equilibrium point from E1 to E2. Such shift in price happens because consumers’ wants changed to more cheaper options such as cava or prosesco, not an expensive bottle of champagne.

Part C

Figure 2 shows why the rpice of champagne will rise next year, as the supply of grapes needed to make champagne will decrease from S1 to S2. The shift from Q1 to Q2 shows how there will be fewer champagnes supplied, and so this affects the price of champagne to increase from P1 to P2 because the producers need to make revenue.

Part D

There will be many pros and cons in not raising the price of a bottle of champagne. The causes of not raising the price would be that fewer people will buy champagne. The pros of the result will be that consumers can buy many champagne to prepare for their Christmas celebration, but the cons will be that the produces/suppliers will have a smaller total revenue.

As for stake holders, there are many that will get affected both good and bad b not raising the price of champagne. First are the suppliers of champagne. If there is a smaller total revenue of champagne, the suppliers of champagne will also have fewer income. This also goes for the producers of grapes and people who sell champagne (the workers). The fewer the total revenue, the fewer their income will be. Another stakeholder that will be negatively affected will be the producers of substitute goods, which are producers of wine. IF the price of champagne is not raised, then consumers will continue to buy champagne instead of wine and so the total revenue of wine will decrease.

On the other hand, stakeholders that will be positively affected are consumers – both high income consumers and low income consumers. This is because if the price of champagne is not raised, they will still be able to buy champagne, as the article says that “champagne lovers should cash in while they can”, as the price of champagne is expected to increase next year. And Robert Joseph, editor of Meininger’s Wine Business International Magazine says that “there is going to be copious cheap champagne around in December because there is simply a lot of it”, and so more consumers will decide to buy champagne. Another stakeholder positively affected are the producers of the complementary goods. If the price of champagne did not increase, consumers will continue to buy champagne, and in addition they will buy champagne’s complentary goods, increasing the revenue for the complementary goods as well.

So in other words, not raising the price of champagne will affect many people, both positively and negatively.

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One Response to Champagne Data Response

  1. Pingback: Portfolio Semester 1 | Kanako's Blog

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