License+plate+prices+approach+record+high+by+Yipsum

=TITLE OF EXTRACT:= License Plate Prices Approach Record High

=SOURCE:= Shanghai Daily

web link: http://www.shanghaidaily.com/article/?id=494683&type=Metro

=DATE EXTRACT WAS WRITTEN:= February 19, 2012

=DATE CURRENT EVENT WAS WRITTEN:= February 20, 2012

=EXPLANATION OF THE ECONOMIC THEORY RELATED TO THE ARTICLE:= In the article it is stated that the supply of the license plates remained at 8,000 in both January and February this year, but the average price increased 2,437 yuan to 55,632 yuan in February. License plates are so hard to come by, they are be auctioned off by Shanghai Commodity International Co. to increasing prices by bidders every month. Although the article states that the number of bidders for the license plates fell from 24,354 in January to 23,391 bidders in February, we cannot say that the number of bidders equals the number of license plates demanded by the public, because people who are willing and able to buy license plates may not have been present at the auction due to frustration and hopelessness at not having been able to acquire a license plate in previous months. One of the bidders, Wang Yi, failed to obtain a license plate this month for the third time in a row, saying that she bid 55,000 yuan but didn't have enough time to raise the offer as prices jumped too quickly. The complaints about "insane prices" is ubiquitous among the tens of thousands of Chinese bidders. It is very likely that even those who were willing and able to procure a license plate did not go to bid for one because of the intensity of the auction. Therefore, although the number of bidders decreased from January to February this year, we cannot assume that quantity demanded decreases. Instead, we have to assume that the quantity demanded for license plates in fact increased because price of the product increased while the supply curve remained stagnant (8000 license plates per month).

The price elasticity of demand for the license plates is also supremely price inelastic. We see people buying license plates that are more expensive than the cars themselves, at prices around 55,000 yuan. This shows that when price of plates increases, quantity demanded also increases but by a less than proportionate amount. As Volkswagen dealer Li Wei suggests, the vehicles demand in Shanghai remains solid, which means that the demand for license plates will be likely to remain strong too.

=VOCABULARY TERMS AND DEFINITIONS:=
 * demand: quantities of a good or service that consumers are willing to and able to purchase at given prices in a given time period.
 * supply: quantities of a good or service that producers are wiling to and able to produce at given prices in a given time period.
 * market: where buyers and sellers come together to carry out economic transactions

=DIAGRAMS:=

=**EVALUATION:**=

The graph shows an equilibrium in January at point A (where the average price per license plate is 53195 yuan), and a second equilibrium in February at point B (where the average price per license plate is 55632 yuan). We can see that because price of the product has increased, the demand for the product has also increased. Because more people are willing to buy the product, the producers will raise the price so that more revenue can be earned. Also, the graph shows that the price elasticity of demand is fairly low, and that the change in quantity demanded is less than proportionate in comparison towards the change in price. People value license plates very much because without one, they are unable to drive legally and therefore are willing to pay lots of money for one.

=**WORKS CITED:**=

Jin Jing. "License Plate Prices Approach Record High." //Shanghai Daily// [Shanghai] 19 Feb. 2012. //Shanghai Daily//. Shanghai Daily Publishing House, 19 Feb. 2012. Web. 23 Feb. 2012. .