Question

In the winter, which is the peak season for winter coats, the price of winter coats is typically higher than it is in the summer. In the case of strawberries, however, the reverse is true: The price of strawberries is lower in the peak season than it is in the winter season. Provide THREE reasons to explain this seeming contradiction. Ensure that you define any key terms used in your discussion.

Answer 1

Solution:

In the winter, which is the peak season for winter coats, the price of winter coats is typically higher than it is in the summer. In the case of strawberries, however, the reverse is true: The price of strawberries is lower in the peak season than it is in the winter season. This can be explained by the concepts of supply, demand and price.

In the winter season, people wear woolen clothes and as a result people wish to purchase woolens like winter coats. The production of coats also increases in winters as more people want to buy them. We can say that the demand for coats increases in the winter season and its supply in the markets also increase.But the increase in production or supply is not as much as the increase in demand, as a result of the increased demand amongst the consumers in the market, the prices of winter coats are high.There are lesser sale and discounts as people are willing to pay more for their necessity.  

On the other hand, in summers, people are unlikely to demand for winter coats as it is not a necessity and hence the demand for coats is very less. Due to lack of demand the production is also less in summers and hence the supply is less in the market. When both demand and supply are less, the prices decrease because it is off season. There are sales and discounts available at the end of the winter season and at the beginning of the summer season because the demand is decreased in summers.   

Strawberries have their most of the supply during the summer season and they have the peak demand during this season. Summers are the season for strawberries. Due to increased demand and also increased supply in the market the prices decrease. The production or supply of strawberries is more as compared to the increase in demand. Hence the prices fall.

On the other hand, the production of strawberries is very less in the summers since winter is not the favourable season for the production of strawberries and hence the demand, so the prices for strawberries are high.