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Microeconomics

13th Edition
Roger A. Arnold
ISBN: 9781337617406

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Microeconomics

13th Edition
Roger A. Arnold
ISBN: 9781337617406
Textbook Problem

Some goods are bought largely because they have “snob appeal.” For example, the residents of Beverly Hills gain prestige by buying expensive items. In fact, they won’t buy some items unless they are expensive. The law of demand, which holds that people buy more at lower prices than higher prices, obviously doesn’t hold for the residents of Beverly Hills. The following rules apply in Beverly Hills: high prices, buy, low prices, don’t buy. Discuss.

To determine

Comparison between snob effect and the law of demand.

Explanation

Snob effect is a violation to the law of demand. The law of demand shows that the demand for a certain good increases with its lowering price; example, normal goods. However, the snob effect shows the behavior of ...

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