2. Typically, goods that are in high demand have a high market price. However, some goods...

2. Typically, goods that are in high demand have a high market price. However, some goods that are in high demand during their peak season have lower prices as compared to their out-of-season price. Use your knowledge of supply & demand to explain the lower equilibrium price of cherries sold in the summer (their peak season), as compared to their price during the rest of the year (say, in the winter). Show it graphically and briefly explain. (3 pts.)

Hint: You should draw two demand and two supply curves in the same graph (for winter and summer). Start with the winter to show your initial demand and initial supply of cherries. Then, show the changes that occur in the summer months and prove that the price of cherries in the summer is lower than in the winter.

Expert Solution

It is true that most of the time the goods that are in high demand bear a high market price. This happens when all other factors are stationary and only the demand is higher (shifted to the right).

However, there are cases when for some goods, even when the demand is very high because of a peak season where people like to consume them more, we see that these goods tend to have lower prices. This is the time when other factors play their part.

Assume that we begin with an off peak period at E in winter where current price of cherries is P0 and quantity of cherries is q0 and the market is in equilibrium. As the peak season or the summer season arrives the demand starts increasing so demand curve shifts right. The new price is P1 and quantity is Q1 and we reach at F

At the same time, there is a good harvest so that supply of cherries is also increased. Supply curve shifts to the right. It may happen that the size of shift in demand curve is less than that of the supply so that price of cherries actually falls while quantity traded rises sharply. This implies we reach at G finally where price is P2 and quantity is Q2. Note that P2 < P0

Rahul Sunny answered 1 year ago

Some products have elastic demands, while other goods have inelastic demands. Typically, the derived demand for...

Some products have elastic demands, while other goods have inelastic demands. Typically, the derived demand for transport follows a similar pattern to the elasticity of the final good, but not always. The share of transportation costs in the final price of the goods may be large or small, regardless of the product’s own demand elasticity, and this can affect the elasticity of the derived demand for transport. With the aid of an appropriate economic model(s) explain the conditions in which...

12. Governments have typically levied high excise duties on goods such as alcohol, tobacco and petrol....

12. Governments have typically levied high excise duties on goods such as alcohol, tobacco and petrol. a. Explain why there might be two quite different motives for such taxes and how these may have changed over time? b. Illustrate the impact of such taxes on an appropriate diagram(s) and explain the demand conditions under which the policies are more likely to be effective. c. Compare the outcomes and the welfare consequences under the different demand conditions in (b) above.

2. If know a market has price elastic demand. will draw the demand curve with a....

2. If know a market has price elastic demand. will draw the demand curve with a. A relatively flat negative slope b. A relatively steep negative siope c. A relatively flat positive slope d. A relatively steep positive slope Suppose I tell you that the price elasticity demand for oranges is around 1.5, for bananas is around 0.7 for melons is of healthier (by eating more fruit and can only aff around 0. 3 We want people to eat to...

In a perfect market, the supply of funds will equal demand for funds. However, there are...

In a perfect market, the supply of funds will equal demand for funds. However, there are restrictions that may cause limitation, which may make the capital market imperfect. What kind of restrictions can you think of? Thank you.

Debt is typically lower cost than equity. However, what are some advantages to increasing WACC and...

Debt is typically lower cost than equity. However, what are some advantages to increasing WACC and having a capital structure weighted with more equity? (Please explain this in some detail to help me understand)

Backtracking search is not typically considered a heuristic search. However, it contains some elements which could...

Backtracking search is not typically considered a heuristic search. However, it contains some elements which could make the approach considered a heuristic search. Examine both backtracking and heuristic search to compare and contrast the two approaches. Be sure to examine aspects of the backtracking search approach that would include it in and excluded it from a heuristic-based classification. non complex nswers necessary

"Scarcity implies that some way of rationing goods must be found." Explain how the market price...

"Scarcity implies that some way of rationing goods must be found." Explain how the market price system promotes greater economic activity than alternative systems of deciding who gets the benefits of production. (eg., first come-first served, equal shares or random lottery.) (6 points)

Along a given demand curve, a decrease in supply will typically a decrease price, but the...

Along a given demand curve, a decrease in supply will typically a decrease price, but the change in quantity could be in either direction b increase price and decrease the quantity c decrease price but leave quantity unchanged d decrease both quantity and price e increase both quantity and price 2 Stagflation refers to a a combination of rising unemployment and rising trade deficits b a combination of high unemployment and rising prices c high and rapidly increasing inflation d...

Suppose we have a perfectly competitive market where at the equilibrium price the total market demand...

Suppose we have a perfectly competitive market where at the equilibrium price the total market demand is 300 units. Each individual firm in the market has a cost function C(Q) = 50 -2Q + 0.4Q^2. The number of firms this market can support in the long run is _____?

Do farmers have some control over their market price of their products?

Question