Page 65 - Microeconomics, Fourth Edition

c02demandandsupplyanalysis.qxd 7/15/10 8:57 AM Page 39

2.1 DEMAND, SUPPLY, AND MARKET EQUILIBRIUM 39

$0.60

$0.50 February 1991–1993
Price (dollars per stem) $0.30
$0.40

$0.20

August 1991–1993 FIGURE 2.10 Prices and
$0.10 Quantities of Fresh-Cut Roses
Prices and quantities of roses
during 1991–1993 for the
0 months of August and
2 4 6 8 10 February––both are much
Quantity (millions of stems per month) higher in February than they
are in August.

law of demand. It reflects the fact that the prices also go up around Valentine’s Day, but by less
Valentine’s Day equilibrium occurs along a demand than the prices of red roses. Overall, their prices show
curve that is different from the demand curve before more stability than the prices of red roses because
or after Valentine’s Day. white and yellow roses are less popular on Valentine’s
Figure 2.11 explains why we would expect the prices Day and are used more for weddings and other special
of red roses to peak around Valentine’s Day (the occur- events. These events are spread more evenly through-
rence of Valentine’s Day is an exogenous variable that out the year, so the demand curves for white and yellow
strongly impacts the demand for red roses). The logic roses fluctuate less dramatically than the demand
of Figure 2.11 also helps explain another aspect of the curve for red roses. As a result, their equilibrium prices
rose market: the prices of white and yellow roses. Their are more stable.

S
$0.60

$0.50
Price (dollars per stem) $0.40 FIGURE 2.11 The

Market for Fresh-Cut Roses
$0.30
During “usual” months, the
$0.20
attains equilibrium at a price
$0.10 market for fresh-cut roses
of about $0.20 per stem.
However, during the weeks
D D around Valentine’s Day, the
1 2 demand curve for roses
0
2 4 6 8 10 shifts rightward, from D 1 to
D 2 , and the equilibrium
Quantity (millions of stems per month)
price and quantity go up.