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Microeconomics Question from Walter E. Williams:Edit

Which good will have a greater fall in its price as the crop is more fully harvested: one that will store more readily or one that is more perishable? Why?

AnswerEdit

Potatoes are an example of a good which is storable under the right conditions for an extended period of time.

Strawberries are an example of a good which is relatively less able to be stored. They are harvested in larger quantites in May (for the northern hemisphere) and are at a low price, in November they would be scarce and at a relatively higher price (perhaps frozen, perhaps shipped in from the southern hemisphere).

Potatoes therefore sell at a price that is closer to constant throughout the year, than the price for strawberries. Potatoes are harvested in September. In March, they are much closer to their average price than strawberries which are about to be in season.

Bottom line: scarcity play a role in the priceing of goods on the market. Storable goods will be less scarce because the consumption can be smoothed over a greater ammount of time.

Source:Edit

  • Hirshleifer, Glazer, and Hirshleifer (seventh edition, 2005)

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