Wednesday, November 11, 2009

Plants versus Flowers

In previous posts, I discussed how our houseplant's life is a good metaphor for our turbulent economy, a metaphor for creative destruction, and how we purchased a temporary friend for him to brighten up our apartment.

Today, our houseplant (Bob) has an economics lesson to share. In my last houseplant post, I asked a question that I left unanswered about the cost of houseplants relative to cut flowers:
Without consulting a price guide, do you care to guess the relative prices of the two types of household foliage?
Here's the answer: Purchasing our houseplant cost us about $5; the bouquet of flowers in the pictures cost about $15. Before we got into the houseplant market, I would have guessed that the prices were the opposite. After all, houseplants are durable; cut flowers are doomed to an early death. All else equal, people will pay more for longer-lasting goods, right? Given this line of reasoning, I was surprised at the difference in prices.

It's not surprising that houseplants last longer than cut flowers. Houseplants are alive, whereas the cut flowers are dead (or slowly dying). What's surprising is that cut flowers cost more at the store. Basic economics affords two convenient explanations for the higher price: the demand for cut flowers is higher (or at least less responsive to price increases), or it costs more to produce fresh cut flowers.... or both.

There's probably some truth to both stories. On the cost side, unsold cut flowers die without contributing to the flower store's bottom line. This is a significant cost that flower companies factor into their supply decisions and prices. On the demand side, cut flowers are a wonderful surprise to bring along on a date, but nothing says creepy commitment like a potted plant on the second date. On its face, flowers seem to have a bigger market.

What do you think? Is it surprising to you that houseplants cost less at the store? Do you have other reasons to rationalize the difference in prices?

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