During December 1997, The Washington Post published an article about the debut of the Princess Beanie Baby. A Beanie Baby retailer, interviewed by the Post, indicated there was strong demand for the new stuffed animal.

KEY CONCEPTS

Quantity Demanded, Quantity Supplied, Supply

INTRODUCTION

During December 1997, The Washington Post published an article about the debut of the Princess Beanie Baby. A Beanie Baby retailer, interviewed by the Post, indicated there was strong demand for the new stuffed animal.

"In just a week, Banner has received 110 or so bids. Here's how they break down: After the $600 topper, there's been "one bid at $500, one at $400, a bunch of $300s and a whole mess of $250s and $200s," Banner reports. The highest bids generally are coming into the Annapolis store, Banner said."

In the quote above, can you create a demand schedule for the princess Beanie Babies? (Use approximations.) What happens to the quantity demanded when the price is lower? At what price do you think the store owner would be able to sell most of his 100 Beanie Babies? $500 or $200? What do you think would happen if he tried to sell them at $5.00 each?

MATERIALS


PROCESS

Visit the following sites:

Visit an online market for Beanie Babies.

Look at the 'buy' and 'sell' prices at "Buy Sell Beanies ."

Discuss the following questions with your students:

1. Why are the 'sell' prices higher than the 'buy' prices?
2. What happens to the difference?
3. Do you think that it's fair for the Collectible Exchange to pay lower prices for Beanie Babies and to sell them at higher prices?
4. Do you think that the Collectible Exchange would have started this service if they could not sell goods at higher prices than what they paid?
5. This company is engaging in a form of arbitrage. Can you list other markets in which arbitrage is practiced?