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    Comparing economic bubbles and collapses

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    The is a two part problem:

    1. Compare and contrast:

    a. The Tulip Stock Bubble
    b. The South Seas Stock Bubble
    c. The Dot.com Bubble
    D. The Real Estate Bubble/Collapse

    2. Based on the compare and contrast, analysis above:

    a. What do you think will be the next bubble/crash
    b. How would you - as a strategic planner - position your business to weather the next bubble/crash

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    Solution Preview

    Step 1
    Each of these is an economic bubble. These are speculative bubbles. There is trading in high volumes at prices that are considerably at variance with the actual value. These are financial or price bubbles. These bubbles are observed only after they have burst or there is a sudden drop in prices. This drop in prices is called a bubble burst.
    The Tulip Stock bubble occurred in Holland between 1634 and1637. During this period the contract prices for bulbs of tulip reached very high levels. When the price of tulips reached the peak, a person could trade one tulip for an entire estate. The buyers began to fill up inventories for the growing season reducing supply and increasing scarcity and demand. At one point 12 acres of land were offered for a single bud. During one month, tulip price increased by twenty times. When some tulip owners decided to sell, the price dived and people sold tulips till the price of one tulip fell to the price of a bulb of onion. This crash led to a depression later.
    The South Sea Company bubble was caused by the shares of the company being purchased by investors. This bubble happened in the year 1711 in UK. The South Sea Company for an IOU to the government of 10,000,000 pound sterling purchased the rights to all trade in the South Seas. It was believed to be the most lucrative monopoly in the world. The price of South Sea stock that was selling at 100 Pounds increased to 1,000 pounds. The management of the company felt that the value of their shares did not reflect the actual value of the company and its poor earning. In 1720, they sold their ...

    Solution Summary

    This posting gives you a step-by-step explanation of economic crises over period of time. The response also contains the sources used.