Question

How will Valentine’s Day or Mother’s Day impact price and quantity of roses in Flower Land? Briefly explain. Draw a diagram that illustrates this effect (hint: what will be effected: supply or demand? In what way?). On the graph, you can depict original supply and demand and equilibrium (from question 2), carefully labeling the axes, intercepts, and curves.

Answer 1

The one thing that Wikipedia has to say about Valentine’s Day in the Philippine setting is: “It is usually marked by a steep increase in the price of flowers, particularly red roses.” And we all know how true that is. The shoot-up in price has nothing to do with rising costs of production; it’s all about demand. The phenomenon of Valentine’s Day prices of red roses is one of the best illustrations of the Law of Supply and Demand: If nothing else changes, higher demand will raise the price of a good, while higher supply will lower it, and vice versa.

To many, Valentine’s Day has become an occasion less about loving and more about spending and profits. It used to be an occasion for handmade cards and gifts; now, Valentine’s Day cards and gifts (especially flowers and chocolates) are a multibillion-dollar industry that props up whole economies. Cut-flower exporters like Colombia, Ecuador, the Netherlands and some African countries make the bulk of their export sales revenues during the Valentine season.