Law of demand
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13:59, 1 August 2010
The explanation for the Veblen effect is that price itself in this case influences the preferences of the household. Preferences are an exogenous determinant of demand.
===Expectations of future prices===
In some cases, buyers may view a rise of price as evidence indicative of an even greater future rise of price for that good. This may be supported by further evidence. If present purchase of that good can substitute for later purchase of the good, then this may actually increase present demand for the good. This happens in particular for durable goods where the inconvenience of not having the good for a short period of time is not that great. It can also happen for non-durable goods if the satisfaction of consuming them is durable -- for instance, a holiday trip today might substitute for a holiday trip six months from now.
Similarly, buyers may view a drop in price as evidence indicative of further price drops in the future, and hence delay the purchase of a good or service.
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Adverse selection versus moral hazard
Determinants of demand
Law of demand
Detailed technical pages
Determination of quantity supplied by firm in perfectly competitive market in the short run
Effect of sales tax on market price and quantity traded
Determination of price and quantity supplied by monopolistic firm in the short run
Comparative statics for demand and supply