Why do some works of art cost so much? The reason is simply because the supply of certain works of art is finite, yet demand from art galleries and wealthy individuals can be very high. Very low supply from sellers and very high demand from wealthy customers pushes art prices upwards until they reach the equilibrium point where demand equals supply. After intense bidding by dozens of keen buyers, this painting by Gustav Klimt entitled ‘Portrait of Adel Bloch Bauer 1’ was sold at an art auction for $135 million. The buyer was an American art gallery.
Discussion
1. In the Case Study on Supply and Demand in the Art Market, give reasons why the price of ‘Portrait of Adel Bloch Bauer 1’ reached $135 million.
2. What’s your opinion on the price paid for this painting? 3. Can you identify one other specialist market where demand can far exceed supply, resulting in prices being pushed very high?
