Written by: Nicole H.
Christmas Tree Craze
It is not hard to find a Christmas tree on display in the holiday season throughout December because it is a well known tradition and it is a tree that means more than just wood and pine needles. Christmas trees are sold in perfect competition, meaning there is little product differentiation, there are many producers, in this case farmers, and the market price is beyond the control of individual sellers. They are price-takers. Christmas tree production happens all over the world, whether it is artificial or a farm-grown evergreen. As for farm-grown trees, the United States is a leading producer, along with Germany and Canada. In fact, Christmas trees are grown in all 50 states, Oregon with the most land devoted to Christmas tree production. During the Christmas season here in the US, each year around 35-40 million trees are sold. Unfortunately, the average tree takes about 6-10 years to fully mature and harvest so each year around 73 million are planted. In the past there has been an oversupply of natural trees in the United States. In the late 1980s through the mid 1990s, prices decreased because of the major supply. “Christmas trees sold for around $5 as opposed to the usual $18-30 each” (Christmas). The use of natural trees decreased, as the use of artificial trees continued to increase. As for today, we see a rise in price of our Christmas trees this season. According to Bryan Zellner who has been in the tree business for years, there are fewer trees this year than last year. Although shortage has happened before, there are even fewer this year than we have seen in previous years. Due to the decrease in supply, prices have increased. Therefore, only the consumers willing to pay this higher price will have a tree in their home. This price increase is pretty significant and according to Zellner they have increased between 10 and 15 percent. The reason for this shortage goes back about a decade ago when this generation’s trees were planted to grow and mature. At that time, the demand for Christmas trees was very low, so as a result growers planted fewer seedlings because of lack of profits. Now in 2017, we are left with a short supply, but a high demand. Another factor that contributed to the supply of trees are some wild fires that occurred in Oregon and droughts that occurred in North Carolina, two states with large tree production. As a result of the decrease in profits over the years, many firms left the industry. Just in five years between 2010 and 2015, the number of growers dropped about 215 growers. As the prices increase this year, I predict that the artificial tree demand will increase as it is a substitute for natural trees. I do not think that there will be a decrease in demand for complements of natural trees because things like lights and ornaments and tree skirts are essential for both natural and artificial. If you do decide to go the natural route, do not wait to get your tree because you may be left with a picked over selection.
Bibliography
Burden, Dan. “Christmas Tree Profile.” Agricultural Marketing Resource Center, www.agmrc.org/commodities-products/forestry/christmas-tree-profile/.
“Christmas Tree Production.” Wikipedia, Wikimedia Foundation, 30 Aug. 2017, en.wikipedia.org/wiki/Christmas_tree_production.
Makaula, Walter. “Why Christmas Trees Are More Expensive This Year.” KCRA, KCRA, 25 Nov. 2017, www.kcra.com/article/why-christmas-trees-are-more-expensive-this-year/13925655.
“Why Your Christmas Tree Will Cost More This Year.” Southern California Public Radio, Southern California Public Radio, 24 Nov. 2017, www.scpr.org/news/2017/11/24/78110/why-your-christmas-tree-will-cost-more-this-year/.
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ReplyDeleteNice job Nicole! After conducting some research myself, I discovered that people this holiday season should be prepared to pay about 10% more for a Christmas tree than last year. Due a deep recession in the United States a decade ago, sales of Christmas trees were sluggish, so growers planted fewer seeds. Fast forward to 2017, the economy has rebounded but fewer mature trees are available. Also, droughts in North Carolina and wildfires in Oregon have reduced the number of Christmas trees available this year. Furthermore, it's likely that there will be problems in the Christmas tree market down the line, as people are retiring and there isn't a younger generation becoming involved—it's a lot of manual labor and time spent in the field to plant and grow Christmas trees seasonally. So, to save some money throughout the holiday season, buy from local growers as it's less expensive and involves chopping down your own Christmas tree in the beautiful outdoors.
ReplyDeleteWhen it comes to crops and/or plants, natural disasters/effects create a huge impact on the resources available to consumers. What my family came to the conclusion of is to buy a fake tree and use it year after year so it's one down payment and after that there are no worries of price and looking for the perfect tree. People are lazy and so that creates the demand to go up for the easiest way possible for certain things. Therefore I think people should go out and pay one flat fee for a fake tree to save the stress and hassle of finding a real one each year. Not only will this route be easier and less expensive, but it helps save trees and prevent allergies to develop with a tree inside a home.
ReplyDeleteWhile artificial Christmas trees are definitely a substitute for organic Christmas trees, the cross-price elasticity between them could be quite variable. For example, as somebody who relishes in the tradition of buying a real Christmas tree, as the price of artificial trees increases, my desire to buy an artificial tree instead increases by a marginally small amount. Due to this, the price of an organic tree would have to be exorbitant for me to justify buying a cheaper artificial tree. On the other hand, families that have a tight budget or are less invested in the tradition of a real tree would more quickly give up the more expensive organic tree for a cheaper artificial tree.
ReplyDeleteI think that Christmas trees are a good example of a nearly perfectly competitively market, but I also think that most people have a place that they prefer to buy trees from due to other reasons besides product differentiation, like the farm animals and other complementary items. I also think that the cross price elasticity of fake Christmas trees and real Christmas trees is relatively inelastic because families that still use real trees do so because they want to be traditional and don't care much about a change in price, and the people who use fake trees don't want to clean it up and are willing to pay a little more for the easier maintenance.
ReplyDeleteChristmas trees are a good example for a variety of different opportunities. For one, they're substitutable with fake trees and fake trees have quite the variety of different-styled trees themselves. Also, during this time of the year the demand spikes from 0 to 100 real quick. With both these points, the elasticity comes into play too. Depending on the scarcity for different firms/places that sell and produce christmas trees, they can either be inelastic which puts the consumers in a tough spot, or elastic, based on the time and supply of them. Another thing to keep in mind is the prices that change as it grows closer to the time of the trees. Based on what market structure one is purchasing from, a tree could be expensive or cheap; it's really the quality that determines the purchase.
ReplyDeleteI really like how you went in depth regarding perfect competition and the specific market structure of it because it informs the reader about the details of the setup. In addition, the statistics that you provided were very interesting to your topic and provided a sense of credibility to your article. I agree that there will not be a decrease in demand because faux Christmas trees will continue to be popular as years go on. People cherish tradition and holidays, in general. However, I do think that people are being more ‘self conscious’ regarding waste and tree conservation, therefore, fake trees may be sold more. I like how you included your own predictions and thoughts; it really helps support your argument.
ReplyDeleteIt's interesting to see how the tree supply has decreased because of all the forest fires that have been happening and the droughts. This decrease in the tree supply could lead more people to purchase fake trees instead, but for a higher price. However, paying a fixed fee for a fake tree instead of buying a real one every year could wind up being cheaper in the long run. I know a lot of families who get real trees like the traditional aspect of picking out the tree ever year but if the supply continues to decrease or prices increase more people might switch over to fake trees.
ReplyDeleteI wonder how this decrease in supply for natural trees will affect the market for artificial trees, and those prices will be driven up too. You made an interesting prediction that fake Christmas trees will continue to become more popular as prices for real trees increase, and I think many people are also becoming more conscious of the environment as well. Although the wild fires are terrible, and decreased the supply of trees, maybe this will be the final straw that causes families to switch from real trees to artificial for Christmas which may benefit the environment in the long run. (Kat Van Hulle)
ReplyDeleteWhen my family gets a Christmas tree, I never really thought or think about the Christmas trees being a perfect competition market. Every year there are two types of families. A family that has a fake tree so they don't have to spend money every year buying a Christmas tree, but then there is the family that keeps their tradition and buys a new tree every year. Personally, I think families are better off buying one fake tree and using that every year because it will take less effort to take care of and clean up when it's time to put the Christmas trees away. Families will save money every year if they buy one fake tree because buying a real tree might not seem like a lot of money but after the years build up they realize there is a lot more money put into Christmas trees than people think.
ReplyDeleteGrowing up my family always had the fake Christmas tree and I never thought of the real Christmas tree market. It is interesting to know that the wild fires are making the supply decrease. I never really thought about the supply of Christmas trees, only that there is a tree lot near my house. I feel like the higher price will drive more people to getting a fake tree. The fake tree markets will have a high demand increasing the price of those trees. The fake tree market is benefiting the most from the fires.
ReplyDeleteI never thought of the Christmas tree industry as perfect competition. But it makes sense! You never see advertising for Christmas tree firms, because it would not effect the price! However, because it is perfect competition, they have free barriers of entry and exit, and if several industries left the industry, it must have been because there was a loss in the short run. Will this decrease in supply be so extreme that it causes people to look for other options, because of the increasing prices? There are several benefits about buying a fake tree instead of a real tree, although they are less authentic, but this might be the last straw.
ReplyDeleteVery interesting how the Christmas tree industry is a lot more important than we realize. My family uses a fake tree every year and we can use it every year and not worry about buying a new tree. So I have experience with driving the Christmas tree industry out of business because having a fake tree eliminates time to take out of a persons day to go and find a real tree. But I had no idea how big of an impact this is having on the firms growing trees. Now that the prices are so high, consumers will probably want to switch to the fake trees. This is a really interesting topic and one I probably would have never thought about.
ReplyDeleteI'm Christmassy guy and Christmas is very important to me. In my house we have a very high ceiling so we like to get a fairly big tree. This topic really resonates with me in the heart as the big Christmas tree my family gets is pretty expensive on the old wallet. For my family however this is an inelastic good because we are gonna get a tree no matter what. This is a great topic and very seasonal as well as well. Also the way you related this back to econ was just magnificent.
ReplyDeleteVery eye opening that the Christmas tree industry is as important as you say. I never realized how expensive these can be. Must take a tole on the credit card each year. I love Christmas...probably my favorite holiday and yet I don't realize the money side of this. Very cool how you can relate Christmas to econ. I love thinking about econ during Christmas..it gets me feeling all fluffy and good inside.
ReplyDeleteThis is very interesting as I never realized that the market for Christmas trees are sold in perfect competition. The fluctuation of the supply is interesting as well because it demonstrates how nature has a huge impact on the industry. Additionally the demand can sway based on whether consumers will prioritize purchasing trees for any price and if they will opt to go the artificial route instead.
ReplyDeleteWow Nicole this is a really amazing blog post, I couldn't pull my eyes away from this perfectly crafted piece. It really is something to see how the need for christmas trees has decreased, I do think that getting one fake tree and using it for the years to come would be cheaper, but the look on my family's face coming down christmas morning to see our real tree is priceless.
ReplyDeleteWith a product like Christmas trees you would think the market would be a good example of a nearly perfectly competitive, but I guess different families have different consumer tastes. My family chose to buy an artificial tree a long time ago, i'm sure this decision was not because of money, but because of the clean up that is involved when taking down a real tree after Christmas but I guess my family saved a good amount of money buying a fake one up front instead of having to purchase a new tree annually.
ReplyDeleteHaving a fake tree in your home is not the same as having a real tree. In my own opinion, having a fake tree in your home is worthless as it doesn't feel Christmas-y. I would be really sad if the price of Christmas trees keeps going up every year, because it might come to a point where it isn't worth it to buy a tree anymore. If this happens, it honestly would ruin the culture of Christmas but more likely is that the prices will eventually drop back down because more and more farmers will start growing trees because they feel like they can make a profit out of them, since they would be at such a high price.
ReplyDeleteWhile for the most part christmas trees are a good example of a perfectly competitive market, I do know a lot of families, including mine, go to specific farms every year due to family tradition. I also think that the elasticity of fake Christmas trees and real Christmas trees is inelastic because families once again such as mine, that are fans of the traditional experience of having the real christmas tree and willing to sacrifice that for the convenience of the fake tree. However, to many families out there the easier clean-up and continual re-use of the fake tree is worth the steeper price tag.
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