Textbook Problem

Some people will pay a higher price for brandname goods. For example, some people buy Rolls Royce cars and Rolex watches to impress others. Does knowingly paying higher prices for certain items just to be a “snob” violates the law of demand?

To determine

Explain that the given statement violates the law of demand.

Explanation of Solution

If people buy a good with higher price, they demand higher quality for that good. Generally, as per the law of demand, when price of a good increases, it decreases the quantity demanded of that good. Under this case, it violates the law of demand. Here, the quality and other non-price factors such as taste and preference are the determinants of demand for goods.

Economics Concept Introduction

Demand: Demand refers to the total value of goods and services that are demanded at a particular price in a given period of time.