Demand for Champagne in recent years Essay Example for Free

Demand for Champagne in recent years Essay The rise in demand for champagne recently can be set down to certain factors. The six determinants that will have affected the rise in demand for champagne over the last few years include: Rise in income, rise in the price of substitutes, fall in price of complements, change in tastes (in favour of champagne), increase in population and an increase in price expected. This can be broken down. Firstly, a rise in income means that people in general will have more available spending money, which can then be allocated to champagne (usually a normal good). If it is indeed a normal good, the usual rules will apply where an increase in Y (income) will mean an increase in demand. The second factor to consider is a rise in the price of substitutes. When champagne is considered, substitutes such as wine or perhaps whisky must be taken into account. If wine is not selling well, or perhaps it is a very good year for selling and the prices are allowed to rise, there will be a lower demand for wine. This drop in demand for wine will mean more available income that can possibly be spent on champagne, therefore a rise in demand for it. A fall in the price of substitutes would also increase the demand for champagne. When something is purchased and another product is necessary (or merely a want) to go hand-in-hand with it, income is needed for both. In the case of champagne, glasses are a complement. If the price of glasses falls, the money that would have been spent on the glasses can therefore be used instead for more champagne. A change in tastes can also affect the demand for champagne. If over the past few years people feel that champagne is a very prestigious drink to have with celebrations and more and more people start purchasing it, the demand for it will rise. An increase in population creates quite a simple example: more people, more consumption. The more people there are the more possible consumers to spend money on champagne. Finally, the price expected can create a rise in demand. If, for example, prices were expected to rise over the next few years, consumers in general would usually purchase champagne now as it is a good that keeps for a long time and would be a much more rational thing to do to purchase it at a cheaper price now than for a dearer price later (for the same good. )