a) Use cheap Australian wine that costs below $10 a bottle and premium wine that costs more than $100 a bottle to explain what an inferior good is compared to normal good.

(3 marks)

b) State another pair of related products as examples of inferior and normal good .

(1 mark)

c) Assuming an increase in income, use the Demand Supply model for cheap Australian wine shown below to

- describe the movement of the demand/supply curves if any,

- indicate what the new equilibrium price and quantity may be.

Q-2 Assuming better than usual weather and soil conditions perfect for grapes cultivation and wine growers in Australia, use the above demand supply model to predict

- what will happen to the demand and/or supply curve,

- whether a temporary surplus or shortage of wine will result and

- what will be the new equilibrium price and quantity of wine.