Coursework Assignment BEHAVIOURAL FINANCE VIEW ON MARKET BUBBLES Essay

Coursework Assignment BEHAVIOURAL FINANCE VIEW ON MARKET BUBBLES - Essay Example During the period of tulip mania it has been observed that the cost of a single tulip had surpassed the average income of an expert employee. The period of tulip mania was considered to be a golden age in the Dutch calendar where the prices of the tulip bulbs reached to an unexpected extent (Thompson, 2006). Literature Review and Explanation of Tulip Mania (of the 17th century) At present time, Dutch flower industry comprise about 70% of global flower production and about 90% of global flower trade. From the past time, Dutch flowers were traded to Europe, where the bulbs of flowers were sold with significant amount of prices. Among all the flowers, Tulip flower is significantly interrelated with the life of Dutch people. Dutch people were quite ecstatic about the tulip flowers. From the historical evidence, it can be observed that Dutch people consider tulips as a symbol of fortune in their life. Throughout the period of 1636 it has been observed that the costs of tulip bulbs became extensively which initiated the event, tulip mania (Goldgar, 2007). Historical Explanation of Tulip Mania (of the 17th century) Tulip was first originated in the year 1593, by a botanist named, Carolus Clusius, who carried tulip plant from Constantinople to Holland. He embedded a small garden to investigate the plant for medicinal purposes. Due to certain perceptions about tulip, the flower soon became a fashion icon among affluent people of Holland. As a result, its demand as well as prices started to increase. Momentarily usual tulip bulbs began selling at higher rate in the flower market (Wood, 2012). Key Elements or Structure of Tulip Mania (of the 17th century) With increasing demand of tulips, different marketers started to make investments on planting tulips which provided less risks and high profits. From historical evidences, it can be observed that in the initial period, tulip plantation yielded better profits, but after some years there was sudden fall in the growth of th e business. Nevertheless, new guidelines were applied for tulip production, but the firms and the industry faced losses due to rises in the prices of buds (Thompson, 2006). Behavioural Finance Phenomena of Tulip Mania (of the 17th century) The behavioural finance phenomena related to tulip mania of 17th Century provided insight about both prosperous and collision of the market of tulip bulbs. The tulip mania had led to extending negative consequences in the Dutch economy. The effects of tulip mania were so brutal in the sense that it led to liquidation of the economy. In the context of tulip mania of 17th century, it can be argued that in the initial period, the prices of the tulip bulbs were not quite high. However, when the tulip buds were carried in Europe, investors from different foreign markets collected those buds and spread in the market. Nevertheless, as time passed there was certain decrease in the demand of tulip bulbs for farmers because of certain risks in the cultivati on. Hence, the production of tulip

Macroeconomic Outlook for Oil Prices Owing to Unrest in the Middle Essay

Macroeconomic Outlook for Oil Prices Owing to Unrest in the Middle East - Essay Example So if for example, we choose to use oil as source of energy instead of thermal or wind, we are trading off thermal or wind for oil as source of energy. Economics is also about cost and benefit analysis. This is because when we try to solve our economic problems and make choices, we look at it through economic perspective by comparing the costs and benefits of our choices. By using oil for energy source means that its costs and benefits are favorable over the other alternatives, thermal and wind sources. B. Market, Demand and Supply Just like any good in the market, oil demand and supply are affected by several factors in the market. Any change in its demand and supply will affect its price and its impact will be felt by the whole economy as well. 1. Market Market is simply a mechanism or arrangement which brings buyers or demanders and sellers or suppliers of a good or service into contact with one another (McConnell and Brue 2002, 49). In this article, we will be analyzing the oil m arket, meaning the mechanism or arrangement where the exchange happens between the buyers and sellers of oil. Buyers or demanders are the ones who are willing and able to exchange their money for oil. On the other hand, sellers or suppliers are those who are willing and able to exchange their product which is oil for money. 2.Demand The report cited that the EIA forecasted demand for oil is usually in the middle of OPEC and EIA demand outlooks. Demand refers to the quantities of a specific good or service that people are willing to purchase at any given price during a specified time period, given other things being constant (Miller 2004, 99). When taken singly, it is referred to as the... This essay presents a comprehensive analysis of the factors, determining the oil price and its volumes of deliveries against the background of worsening political situation in the Middle East. Market is simply a mechanism or arrangement which brings buyers or demanders and sellers or suppliers of a good or service into contact with one another. Demand refers to the quantities of a specific good or service that people are willing to purchase at any given price during a specified time period, given other things being constant. Supply is the amount of a particular good or service a seller or supplier is willing and able to produce and make available for sale at specific price and time. The total of all the supply available in a market will be the market supply Prices affect market demand and supply but there are other factors present in the market that can cause changes and can determine market demand and supply. The surplus in oil stocks was forecasted because the demand is at slower rate than the production. So, if the oil suppliers will continue producing oil at the same rate as before, they will be producing more than what the oil demanders are willing to buy from them. This situation will result to a surplus of oil in the market. To at least decrease the amount of surplus and bring the production near to equilibrium, OPEC members agreed to cut their supply by setting output quotas. The expectations about the future economic condition cause consumers to cut their spendings.