Question

What connection does the author make between the prices and demand for tulip

Answer 1

Answer: A Tulip prices increased as the demand increased.

Explanation:

In the article titled, Inflation and Bubbles and Tulips, the author attempted to explain how an Economic Bubble can develop when people overvalue a commodity.

The example used was the Tulip bubble of the 16th century in the Netherlands. Tulips were a new and interesting thing to the Dutch so the demand for them was high which also led to a higher price. The Tulips were then attacked by a virus which made them more aesthetically pleasing which led to the demand for Tulips rising even more.

This increased demand made Tulips even more scarce and so the prices kept rising with people trying to get their hands on more so that they could sell at a higher price.