Economics Supply and Demand?

Question

In the winter of 2006–2007, unusually cold weather led to a huge surplus of snowmobiles all over Minnesota. Fully explain how the surplus came about and how the "invisible hand" dealt with this surplus.

I'm not asking anyone to fully explain the answer, because I know that it's my homework to do, but does the surplus come because more people want to ride snowmobiles because of the cold weather, or does the surplus come because it's too cold to ride snow mobiles, and there are extra? Thanks!

Answer 1

Well, you have to understand Minnesota always gets snow.  So the snow mobile companies should have had excellent historical sales figures compiled over the past decade+.  Thus, suppliers would not purchase a higher quantity in expecatation of an extended winter (since these can be delivered from the factory fairly quickly).  That is, if the winter looked like it was going to be longer than normal, two months before it's end they could just order more snow mobiles.

So your answer would have to lean towards the fact that demand was reduced by customers for some reason.

Answer 2

The question doesn't say that the surplus specifically occurred  in that same cold weather(winter of 2006-2007).  Therefore it is possible and logical that the surplus took place after the cold winter in 2006-2007.  The question states "led to a huge surplus" --"led to"--meaning future.  The question does not state when the surplus occurred, only that there was a very cold winter and that a surplus occurred at some time(but not when it occurred).

The surplus, may have come about from snowmobile dealers anticipating another cold winter the next year and ordering too many snowmobiles or raising the price too high for people to be able to afford them.  From the question it sound like the surplus is coming from the supply side.

There is really not enough data and information provided to answer this question.  The answer would be based on speculation, more than logic or facts.

Answer 3

You need more data to understand the cause - perhaps a survey of people who own or are thinking of buying a snowmobile.

That said, chances are there is a temperature range for operating a snowmobile that is comfortable for people.  If it is really too cold then people don't want to be cruising around for hours.  Also, is there a temperature too low for safe operation? E.G. did the snow become ice covered?

And did the rising cost of fuel impact it? Were there new restrictions placed on where a snowmobile can operate?