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Zorluk: ZorConcept and Law of Demand

A luxury wristwatch brand in Lagos increases the retail price of its flagship timepiece from ₦500,000 to ₦750,000, resulting in an increase in monthly quantity demanded from 120 units to 180 units among high-income consumers. Ceteris paribus, which economic concept accounts for this exception to the fundamental law of demand?

  1. The commodity is an article of ostentation, whose demand increases with price due to its prestige value.Cevap
  2. B
    The price rise caused a rightward shift of the demand curve driven by non-price determinants.
  3. C
    Luxury watches and precious metals are in joint demand, causing an inverse elasticity reaction.
  4. D
    A maximum price ceiling was enforced below equilibrium, creating an artificial shortage.

Cevap

The commodity is an article of ostentation, whose demand increases with price due to its prestige value.
The standard law of demand states that, ceteris paribus, price and quantity demanded are inversely related. However, luxury items known as articles of ostentation (or Veblen goods) are exceptions to this rule. For these goods, a higher price increases their snob appeal and status value, causing affluent buyers to purchase more at higher prices.

Adım Adım Çözüm

1
Analyze the observed price and quantity relationship
Price increased from ₦500,000 to ₦750,000, while quantity demanded increased from 120 to 180 units.
Standard law of demand predicts an inverse relationship where quantity demanded falls when price rises.
2
Evaluate theoretical exceptions to the Law of Demand
Conspicuous consumption goods (articles of ostentation or Veblen goods) exhibit a positive relationship between price and quantity demanded because consumers purchase them to demonstrate wealth and social status.
Higher prices increase the perceived exclusivity and prestige of ostentatious goods.
3
Select the matching economic principle
The option identifying the product as an article of ostentation correctly accounts for this upward-sloping demand behavior under ceteris paribus conditions.
It addresses the specific exception phenomenon described without mistakenly attributing it to non-price curve shifts or market interventions.

Anahtar Kavram

Exceptions to the Law of Demand (Articles of Ostentation / Veblen Goods)
Tahmini Süre:1m 30s
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Konular

Concept and Law of Demand

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