On Valentine’s Day, the price of roses increases by more than the price of chocolates and greeting cards. Why? [Hint: Consider what makes roses, chocolates and cards different and how that difference might affect supply’s responsiveness to price.]
On Valentine's day the price of roses , chocolates , cards all rises because of high demand on a single day . High demand causes the demand curve to shift right causing both rise in price and quantity . But we see that price of roses increases more than other two products . The reason behind this is elasticity of supply . Roses are natural goods which cannot be grown overnight , so they have an almost fixed volume of supply on the day . Also supply of roses are unpredictable , dependent on climate and are easily perishable . This makes supply of roses very inelastic to price change . Even if price rises supply cannot be changed quickly . But greeting cards and chocolates are easier to manufacture and store .
Change in demand can be met without a large change in price when supply is elastic . But change in demand causes huge change in price when supply is inelastic or unresponsive .
On Valentine’s Day, the price of roses increases by more than the price of chocolates and...