Jump to: navigation, search

Law of demand

692 bytes added, 14:38, 7 May 2011
Apparent counterexamples
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.
===Price as a quality signal===
In some cases, particularly for [[credence good]]s, where the buyers have no direct way of judging the usefulness of a good, the price of a good may be taken as a signal of its quality. A low unit price may be viewed as a signal of poor quality and a high unit price may be viewed as a signal of high quality. This is similar to, but not quite the same as, the situation with a Veblen good -- here, the higher price does not directly increase the desirability of possessing the good but rather is being used as a signal of other information. If the quality information were available directly, then the higher price would not increase the quantity demanded.
===Expectations of future prices===
Bureaucrats, emailconfirmed, Administrators

Navigation menu