Some economists believe that there are goods that do no obey the law of demand, because the demand for them would actually drop if their price fell.

One example is a top-of-the-line luxury car.

Why do you think prospective buyers might feel differently about these goods?

Question

Social Studies

Lane Stein

25 April, 12:40

Some economists believe that there are goods that do no obey the law of demand, because the demand for them would actually drop if their price fell.

One example is a top-of-the-line luxury car.

Why do you think prospective buyers might feel differently about these goods?

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Answers (1)

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Gwendolyn Morris · Answer 1

The goods are termed Giffen goods. Normally, the higher the price of a commodity, the lower the quantity demanded, and the lower the price, the higher the quantity of that same commodity.

The higher the price of a Giffen good, the higher consumers will demand it, thus, violating the law of demand. If the price drops, prospective buyers might feel the commodity has become inferior and might purchase a close substitute of that commodity, though, substitute goods are quite rare.

Some economists believe that there are goods that do no obey the law of demand, because the demand for them would actually drop if their price fell.One example is a top-of-the-line luxury car.Why do you think prospective buyers might feel differently about these goods?

Some economists believe that there are goods that do no obey the law of demand, because the demand for them would actually drop if their price fell.

One example is a top-of-the-line luxury car.

Why do you think prospective buyers might feel differently about these goods?