Hi guys, I am new here, and I am really having trouble in my microeconomics class. Please forgive me if I am posting this in the wrong forum. Anywho I am a new to economics, and there is a problem in my textbook that I am confused on how to go about answering it. The question is: "In November 1998 Vincent van Gogh's self-portrait sold at auction for $71.5 million. Portray this sale in a demand and supply diagram and comment on the elasticity of supply. Comedian George Carlin once mused, 'If a painting can be forged well enough to foll some experts, why is the original so valuable?' Provide and Answer." The question is from Economics, 18th edition, McConnell/Brue/Flynn. McGraw-Hill Irwin. (posting this because of copyrighting and what not). Any help would be greatly appreciated.
Seems like an odd compound question. I guess the supply/demand diagram would be #of vvg paintings sold and somehow plot that against demand. Demand might be # of bidders at vvg auctions. Also, no more orignal vvg paintings can ever be created so the supply is finite. The second question has to do with originality and work by the original painter. Copies, no matter how well made, are just that. Copies in the relm of paintings. Buyers are buying the artist's work more than the astetics of the painting in this case.
I would plot supply on the diagram as the price and demand as the number of bidders at each price level. There is no elasticity of supply since there is only one of the product. Buyers have to accept the prevailing price or be out of the market. Demand would not increase or decrease the supply only the price. Forged copies may 'fool' some people but not all so there is no replacement for an original painting therby making the original valuable.
When you draw your graph supply would be a straight up and down line at q=1, because there is only one painting, hence supply is completely inelastic. The demand curve would meet the supply curve (line) at the last sold price. The demand curve should still have a downward slope, if there happened to be two paintings (impossible in reality) the price of the one would go down. The 2nd part of the question is redundant, but is trying to help you get to the answer of the first part, and was already answered by the above post. no matter how good the copy, it is still just a copy and won't increase the supply or affect the price of the original.... Because supply is completely inelastic. 5yr
That helped completely. So there would be no slope when taking into account the number of fakes in production. I feel like if someone cannot have the original, they might go out and buy a look-a-like.
The fakes, the quantity and the quality will have absolutely no affect on the price of the original. If you are a billionaire and want a van goth, a high quality fake will not be an option. So when drawing the graph only the original matters, the fakes should not be represented in the graph. Good luck Big Econ Dork