Question

Christmas card sales increase during the last three months of the year, and the sale of fresh strawberries in the North increase during the early summer months. However, the equilibrium price movement of these two commodities is quite different during their peak sales seasons. Christmas cards increase in price when the equilibrium quantity increases, whereas strawberries decrease in price when the equilibrium quantity increases. Why does this difference occur?

Answer 1

Answer:

The difference occur because demand for Christmas cards increases and supply of strawberries increases.

Explanation:

During the peak sales period of the last three months of the year the sale of Christmas cards increases, while in the north the sale of strawberries increases in the early summer. But the price of Christmas card increases in its peak period of sale while the price of strawberries decreases.

This is because in the peak period the demand for Christmas cards is increasing, it causes the demand curve to shift to the right. This increases the equilibrium price level an equilibrium quantity.

In the peak period the supply of strawberries increase, this causes the supply curve to move to the right. As a result, there is an increase in the equilibrium quantity and a decrease in the equilibrium price.