Answer to Question #81687 in Microeconomics for Rhea J

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.

Answer 1

The first reason for such contradiction is the difference in the price elasticity of demand for coats and strawberries. Price elasticity of demand for coats is lower, than price elasticity of demand for strawberries. That is why it is possible for sellers to increase prices for coats. such growth of prices for strawberries would decrease demand and, respectively, sales. Second of all, people are not able to give up coats, when it is cold. On the other hand, it is possible to give up strawberries and find some substitutes. Finally, supply of strawberries strongly exceeds demand for it in the peak season. That is why the prices are lower. The opposite situation is with couts in autumn and winter.