AP Econ
New Year’s Eve Toasts
New Year’s Eve does not require nearly as much spending as Christmas or (depending on the person) Valentine’s Day, but there is still much spending for this day. Many people throw parties or small gatherings to watch the countdown on their TV, but some people do more. “The vast majority of people spend less than $200 each for the festivities, but 9 percent spend as much as $500 and 3 percent spend as much as $1,000 for New Year’s Eve. One percent spend more than $1,000 on the event,” (Stribling). The final 1% is likely spending so much money on travel, while the vast majority of people buy cheap party hats and some appetizers. The most prominent thing people buy for New Year’s Eve is champagne. Champagne is large in demand because of the tradition and social norms
There are no advertisements for champagne, and very little product differentiation (of course, there are some products that are better than others). There are not very many firms in the industry, it the champagne market is a monopolistically competitive. There are some natural barriers of entry in the champagne market, like availability of land, technology, and other capital resources. Because it is monopolistically competitive, the champagne market will likely not make a profit or loss in the long run, and more firms enter or leave the industries as the profit fluctuates. Normal profit is expected. However, in the short run, the changes in social norms and the holiday seasons increase the amount of demand for champagne.
Hand in hand with champagne is sparkling grape juice, the kid-friendly version. Champagne and sparkling grape juice are complements. When someone buys the former, they will likely buy the latter, especially if they have children attending the party. The same trends for champagne can be observed about sparkling grape juice: demand increases during the holiday season. When the demand for champagne increases, so the that for sparkling grape juice.Champagne is also a luxury; with an increase in income, there is an increase in demand. The income elasticity of demand is positive.. If people are willing to spend over $1,000 on New Years Eve, they are likely willing to spend a lot of money on a bottle of champagne. At times, the more expensive the bottle is, the more in demand it is. An expensive bottle of champagne can symbolize wealth, power, or luxury, and oftentimes people want to give those impressions. Bottles of champagne can range very heavily in price, and the people with larger incomes tend to buy the more expensive bottles, even if that sacrifices taste or quality.
Works Cited
“Champagne and Sparkling Wines For Your 2018 New Year's Party.” Fortune, fortune.com/2017/12/27/champagne-sparkling-wine-2018-new-years-eve/.“The Comité Champagne.” Champagne.fr, www.champagne.fr/en/comite-champagne/about-us/the-comite-champagne.
Stribling, Dees. “Economy Watch: The Economics of New Year's Eve.” Commercial Property Executive, Commercial Property Executive, 30 Dec. 2016, www.cpexecutive.com/post/economy-watch-the-economics-of-new-years-eve/.
“Welch's Sparkling | A Kid-Friendly New Year's Eve Tradition.” New England Today, 18 Dec. 2017, newengland.com/today/living/new-england-nostalgia/welchs-sparkling-grape-juice/.
I Think it would have been interesting to see how much people spend at bars on new years. As they are often crowded streaming the ball drop live. It would have been interesting to see the size of change in bar attendance during new years eve. However it was interesting to think about as my family always has a few bottles of "kids wine" at our holiday parties, and I have never thought about how the sales might spike at different times of year
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ReplyDeleteKelly Longhini - I can certainly understand the increase in demand of champagne and sparkling grape juice around New Years Eve as I have seen friends and family stock up on these beverages to celebrate. I find it particularly intriguing that 9% spend as much as $500, 3% spend as much as $1,000, and 1% spend over $1000 for New Years Eve (though I find these statistics believable as I have known people to spend excessive amounts of money on fancy seafood for New Years). I think it would be interesting to analyze the income levels of the top 1%, 3% and 9% to see how annual earnings correlate to how much a person is willing to spend at the end of the year on food and accessories for New Years Eve.
DeleteThis is particularly interesting and something I wouldn't necessarily realize. Yet, it is completely true-my family almost never buys sparkling grape juice except for New Year's Eve! I agree with Kelly in that it would be interesting to find the correlation between income and New Year's spending, as it would be expected that those with a higher income are the ones hosting the parties, not just attending. With that in mind, these people are probably not buying $500-$1000 worth of champagne. I would guess that other various luxury goods are in high demand among these consumers at this time as well, such as expensive food items or luxury venues for a party.
ReplyDeleteGood point of the demand in relation to holidays. Obviously, demand fluctuates frequently based on the time of the year. That being, with New Years being the most celebrated holiday, the willingness of the drainage of people's incomes increases because of the occasion's popularity. Champagne and sparkling grape juice are probably the most preferred beverages. I'm even guilty of loving sparkling grape juice; but I would not most likely buy it if it wasn't around the time of New Years or Thanksgiving. Market choice I feel would be best by changing more to increase the different expansions of products which might even, if used correctly, allocate more of the firms resources efficiently.
ReplyDeleteIt’s not something we generally would assume people spend a lot of money on, but when we total up the amount spent on food, alcohol, decorations, and travel, it adds up to a lot. I never really thought about champagne and sparkling juice going hand in hand, however, when you introduced the idea of having children at the event, it makes sense. Champagne is typically more of a classy drink with a much higher price than your typical alcoholic drink. I feel it is more common for those in the middle class to spend money on going to the bars or having lots of alcohol present rather than just a bottle of champagne due to such a high price for a temporary luxury.
ReplyDeleteYou bring up some interesting facts because I can relate this to my own life! On New Years, there are always tons of bottles of champagne and kids wine ready to go. The economic impact of these two holiday drinks is something I am sure not many people think about when it comes to this celebration. Looking at your provided statistics, I find it to almost seem slightly egotistical that around this time the higher luxury bottles are in demand. The more expensive bottles showcase wealth and luxury which is what a lot of hosts (especially the 10% who spend $1000 or more) want to make a point at their parties. Since these particular champagne bottles are already scarce, but are also in high demand at this time, their value increases. For the companies that make these bottles, they can make a maximum profit around this time of year.
ReplyDeleteI found this article particularly interesting because although I have seen family and friends stock up on champagne and grape juice around New Year’s Eve, I never realized that this is about the only time of year it is purchased. Yet, I agree with the other comments that it would be beneficial to analyze the financial status of the people spending obscure amounts on a simple drink. Another thing that might be interesting to see is the profits of these drinks around the holidays compared to any plain time of year. These companies aren’t spending much on advertising, and is that worth it for them if their profits are going down from January through November?
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