Question

You are watching a national news broadcast. It is reported that an early snowstorm is heading for North Carolina State and that it will likely destroy much of this year’s apple crop. Your roommate says, “If there are going to be fewer apples available, I’ll bet that apple prices will rise. We should buy enormous quantities of apples now and put them in storage. Later we will sell them and make huge profits.”

If this information about the storm is publicly available so that buyers and sellers in the apple market expect the price of apples to rise in the future, what will happen immediately to the supply and demand for apples and the equilibrium price of quantity of apples? Can you “beat the market” with public information? That is, can you use publicly available information to help you buy something cheap and quickly sell it at a higher price? Why or why not?

Answer 1

If this information is publicly available , then suppliers try to hoard apples and want to supply when price rises , buyers demand more and more till price is low . Supply decreases and demand increases at present . So equilibrium price will rise , effect on equilibrium quantity is ambiguous .

No we cannot beat the market , as information is available to all , so everyone will try to make best out of it and ultimately follow the market forces of supply and demand .