Law of Demand States That Thesis

Total Length: 460 words ( 2 double-spaced pages)

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With certain luxury goods, the reverse of the law of demand holds true: the higher the price, the greater the perception of quality. A pair of Seven jeans or a pair of Sears jeans can be equally functional as clothing: but the greater social status given to the brand-name, designer jeans results in a higher price and greater demand for Seven jeans (Elasticity, 2009, Spark Notes, p.1). High prices can have a 'signaling' effect, justified or not, that the item is especially socially desirable or of higher quality (Thomas et al. 2004). High prices can also act as a form of screening of a 'certain type of customer:' the high rents in the Hamptons ensure that only very wealthy people can afford to rent or buy property in the area, making property in the region desirable because of its high price, although many other nice, seaside towns may be equally close to the ocean.


Reference

Elasticity. (2009). Spark Notes. Retrieved January 14, 2009 at http://www.sparknotes.com/economics/micro/elasticity/section1.html

Thomas, Manoj, Vicki G. Morwitz & Leonard M. Lodish. (2004, January 24). When do higher prices increase demand? The dual role of price in consumers' value judgments. Wharton.

University of Pennsylvania. Retrieved January 14, 2009 at http://marketing.wharton.upenn.edu/documents/research/When_do_higher_prices_increase_demand_2004.pdf.....

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