Excersise

A New York Times article (https://tinyco.re/6343875), describes how the worldwide markets for opals, sapphires, and emeralds are affected by discoveries of new sources of gems.

1. Explain, using supply and demand analysis, why Australian dealers were unhappy about the discovery of opals in Ethiopia.

2. What determines the willingness to pay for gems? Why do Madagascan sapphires command lower prices than Asian ones?

3. Explain why the reputation of gems from particular sources might matter to a consumer. Shouldn't you judge how much you are willing to pay for a stone by how much you like it yourself?

4. Do you think that the high reputation of gems from particular origins necessarily reflects true differences in quality?

5. Could we see bubbles in the markets for gems?