Question

During the Christmas shopping season, both buyers and sellers expect prices to fall significantly after December...

During the Christmas shopping season, both buyers and sellers expect prices to fall significantly after December 25. Using demand and supply analysis, explain what impact this expectation has on the market in the weeks approaching Christmas, compared to what would happen if buyers and sellers did not have these expectations about future prices.

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Answer #1

Any such expectations will cause the price to fall a week before Christmas.

In the given scenario as the people expect that the prices are going to fall after Christmas they will postpone any purchasing activity till Christmas this will cause the demand to fall in the market. Now we have a constant supply of goods, and the demand for them is declining this will cause the prices to fall well before a week of Christmas.

If the buyers and sellers don't have any such expectations about the market price the prices will not fall before Christmas. As the people didn't expect the prices to fall after Christmas they will continue to purchase goods as always this will keep a constant demand and supply in the market keeping the prices stable.

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