South-Western College Publishing - Economics  
A Christmas Tree Grows in Honolulu…sort of.
Subject Christmas tree shortage in Honolulu
Topic Equilibrium, Supply and Demand  
Key Words

Christmas, trees, shortage, surplus, price, supply, demand.

News Story

A shortage of Christmas trees arose in Hawaii this past season, owing mostly to a significant excess supply in 2003. Tree sellers reacted by buying fewer trees than previously, and consumers were stuck.

Hawaiians take very seriously their Christmas season, buying lights, trees and ornaments. Many people were desperate to get a tree when they couldn’t find one in Honolulu. Artificial tree sellers sold out immediately. LL Bean began shipping trees overnight to consumers, and quickly sold out of their stock. An Oregon company shipped trees to the islands for $225 each, about 4 times more than islanders are used to paying for their Christmas spirit. But then people got desperate; one vendor tried to sell tree stumps with branches attached to them for the bargain price of $10 each. And one family was going to hang its ornaments on a spiral of lights bought at the local hardware store.

And some people got entrepreneurial: One auto mechanic had 60 trees flown in from California on a weekend, advertised the presence of the trees in newspapers and from a sign outside his garage. Charging between $50 and $100, he did pretty well: By Tuesday, only seven were left.

Questions
1. Use a graph of supply and demand to indicate the problem Christmas tree vendors experienced in the Christmas season of 2003.
2. Was the tree vendors’ decision to bring in fewer trees in 2004 a rational response to what happened in 2003? Why or why not?
3.

Indicate with a graph of supply and demand what happened in the market for Christmas trees in 2004.

Source

Michele Kayal. “With Christmas Trees in Short Supply, Hawaiians Improvise.” The New York Times. 24 December 2004. http://www.nytimes.com

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