03 May WHAT IS THE RELATIONSHIP BETWEEN PRICE AND QUANTITY FOR UPWARD SLOPING DEMAND CURVE?
You are on the right track, Michelle, with your references to luxury goods. For example, a membership in an exclusive golf club is a status symbol, so it could be considered a Veblen good with an upward sloping demand curve. Heres some more background on Veblen goods . . .
The demand for a Veblen good rises when the price rises because it is perceived as a status symbol. Expensive luxuries, such as Rolex watches and expensive wines, often meet the definition of Veblen goods. Interestingly, The Economist (2009) article Its expensive, so it must be good cites a study that showed “. . . education at a pricey institution could be a Veblen good, such that an increase in tuition makes the school more desirable as a status symbol” (para. 3).
Class – What other examples do you have of expensive luxuries that are status symbols?
References
The Economist. (2009, September). Its expensive, so it must be good. Retrieved February 16, 2018 from https://www.economist.com/blogs/freeexchange/2009/09/its_expensive_so_it_must_be_go
Its expensive, so it must be good – The Economist
www.economist.com
THERE are plenty of interesting factoids in this post, on a study examining the well-known U.S. News and World Report annual college rankings.
Hello, Everyone – The Week 5 assignment asks you “why might higher interest rates reduce savings?” According to Mankiw (2015):#7 Why might higher interest rates reduce savings? ( Professor) (100 words)
The case shown in panel (b) might at first seem odd: Saul responds to an increase in the return to saving by saving less. Yet this behavior is not as peculiar as it might seem. We can understand it by considering the income and substitution effects of a higher interest rate. (p. 45)
Class – How will you respond to the question of “why might higher interest rates reduce savings?” Why is this an important question for economic policy-makers?
Reference
Mankiw, N.G. (2015). Brief principles of macroeconomics,7e (7th ed.). Stamford, CT: Cengage Learning.
#8 What is the relationship between price and quantity for upward sloping demand curve? ( Professor) (100 words)
Vickie and All — Please note: Gasoline is a normal good as quantity of gasoline demanded falls as price rises. At current prices, though, gasoline is inelastic; the quantity of gasoline demanded falls relatively less than the rise in price. For example, if the price of gasoline rose by 10%, then the quantity demanded of gasoline would fall by less than 10%.
Class — What is the difference between a normal good that has an inelastic demand and a good that has an upward sloping demand? What is the relationship between the price and quantity of a good that has an upward sloping demand?
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