"There are over 2000 wine makers in Australia with 8000 varieties of grape, each wine has its own unique taste. To become a wine producer could be affordable to most investors. Unfortunately, recent floods have destroyed over 80% of the grape crops in NSW and Queensland".

Referring to the above, use the Supply/demand Model to answer the following questions: Question 1a)Given the above information, how does it affect the Supply? What would happen to the Supply curve, the equilibrium Price (Pe) and quantity (Qe)? (3 marks) [Answer here]

Question 1b) "The top destination for the Australian wine was mainland China, accounting for 24%. Due to the trade war between Australia and China, the sale of wine to China has dropped significantly".

Question 1b)Given the above information, how does it affect the Demand? What would happen to the Demand curve, the equilibrium Price (Pe) and quantity (Qe)? (3 marks)

[Answer here]

Question 1c)Refer to question Question 1a) What type of market structure is the wine industry in Australia according to the above information? Explain. (3 marks)

[Answer here]

Question 1d)A 15 per cent rise in the price of red wine increases the quantity of white wine demanded by 10 per cent. Calculate the Cross elasticity of demand (CED) for red wine and white wine. Are red wine and white wine complements or substitutes? Explain. (3 marks)

[Answer here]

Question 1e)A 20 per cent rise in the price of grapes decreases the quantity of red wine demanded by 25 per cent. Calculate the Cross elasticity of demand (CED) for grapes and red wine. Are grapes and red wine complements or substitutes? Explain.(3 marks)

[Answer here]