Sir Isaac Newton (1642 – 1727)
“I CAN CALCULATE THE
MOTION OF HEAVENLY
BODIES, BUT NOT THE MADNESS
OFPEOPLE.”
How much would you pay for a Tulip?
Goods allegedly exchanged for a single bulb of the Viceroy
Two lasts of wheat 448ƒFour lasts of rye 558ƒFour fat oxen 480ƒEight fat swine 240ƒTwelve fat sheep 120ƒTwo hogsheads of wine 70ƒFour tuns of beer 32ƒTwo tons of butter 192ƒ1,000 lb. of cheese 120ƒA complete bed 100ƒA suit of clothes 80ƒA silver drinking cup 60ƒTotal 2500ƒ
DUTCH GOLDEN AGE
• 17th Century – Through a merging of events, the Dutch reached a Golden Age
• Creation of a Middle Class
Artists: Vermeer, Rembrandt
MAIN REASONS• Cheap Energy from:
• Invention of Windmills• Use of Peat
• Sawmills led to:• Boat building economy• Ships for Trade & Navy
• Tolerant Society• Exploration of Science• Religious and Intellectual safety
ECONOMICS
•VOC – Dutch East India Company•First ever multinational company (1602)•First modern stock exchange
•Monopoly on trade•Tulip Mania
• Definition 1 = The buying and selling of stuff
• Definition 2 = The study of the production, distribution and consumption of goods and services
• Supply & Demand
WHAT IS ECONOMICS ?= Study of Commerce
SUPPLY & DEMAND
Supply Demand0
1
2
3
4
Surplus
Supply Demand0
1
2
3
4
Equilibrium
Supply Demand0
1
2
3
4
Shortage
STOCKS/SHARES = SHARED RISK
Expedition Investment Result Profit
Japan $100 Boat sunk -$100
Malacca $100 Returns +$200
China $100 Pirates +$100
India $100 Returns +$250
Total: +$250
• Allows individuals to buy shares or stock in a company
• “Shared ownership”
• Bull Market
(prices go up)
• Bear Market
(prices go down)
STOCK EXCHANGE(video)
MONOPOLY
• When one person or enterprise is the only source of a good or service
• Dutch had a monopoly on spices from Asia
TULIP BUBBLE aka TULIP MANIA• Definition: when asset prices deviate from intrinsic value
(prices are out of whack)• Inflated expectations = inflated prices• A trigger collapses the artificial prices (Bubble Bursts)
= economic destruction
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