Apparent exceptions to the law of demand And why they are invalid 1 ） The price of wheat falls and the buyers think to themselves,” Price is falling. It will fall further. If I wait, I can later buy more cheaply. Therefore, I will withdraw current order to buy.” Apparently it appears to mean that a lower price comes a less, not higher purchase. Reply : Future price will lower……Relative to the lower future price, the current price is higher…. .exactly an evidence of the law of demand 2) “Prestige goods” like Harvard degrees, Rolls Royce cars, Orrefors crystal….Having these kinds of goods sheds prestige on the buyer. Reply But the law of demand is also true to prestige goods. Let‘s say the prices become much higher, people’s demand will decrease. 3) The sellers offer to sell at a higher price to show the goods are better. Reply : Price is an index of quality. Fundamentally, inferior goods sell at lower prices. The public’s association of higher price with higher quality is a sequence ,not a refutation of
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This note was uploaded on 04/26/2008 for the course ECN 115 taught by Professor Jia during the Summer '06 term at Northeastern.