Concept: Price elasticities, supply and demand, equilibrium
Background: In this clip, the Queen’s Necklace, given to Marie-Antoinette by Louis XVI, is auctioned off with a starting price of 17 million euros. Assane Diop starts with a bid of 33 million euros and ends up purchasing the necklace for 60 million euros. The necklace behind the episode is, in fact, real. The so-called “affair of the necklace” was a scandal that discredited the French monarchy in 1785 on the eve of the French revolution. The jewelry was comprised of 647 diamonds weighing 2,840 carats (Lever, 2013).
Question 1: What is the value of the price elasticity of supply for the Queen’s Necklace? Explain why the necklace is sold for much more than its intrinsic value.
Question 2: Draw the supply curve for the Queen’s Necklace. Suppose the demand curve is: Q = 100 – 1.65P. What is the equilibrium price?
Question 3:The Queen’s necklace was sold during an auction. However, this is not how we typically purchase our goods and services, not even jewelry. Most people buy those in stores where the price is already defined and usually with a price tag. Why are unique pieces of jewelry, such as the Queen’s necklace, typically sold during an auction? How does that differ from going to the jewelry store?
