Market Bubbles

In a market bubble, a term that came into common use during the South Sea Bubble of 1720, the price of a commodity rises far higher than estimates of a commodity’s difficult-to-specify real value. This price rise is not like a sharp inflationary increase, in that the price of the commodity does not move with the market, but, rather, in response to extraordinary demand. The price rise usually occurs after a new product or technology or social opportunity appears, and slopes upward rapidly under a demand that appears more like a social contagion than a market exchange. The commodity is perceived by buyers as unique, scarce, and nonsubstitutable. The price rises to a level far higher than that at which the commodity was recently and/or ...