Chapter 4, part 3 (demand)

Question 1

Exceptions to the law of demand(4)

Answer 1

1-Status symbols, snob items and ostentatious goods.
2-Giffen goods.
3-Goods influenced by consumers expectations and speculative goods
4-Goods of an addictive nature.

Question 2

Status symbols, snob items and other goods

Answer 2

Some commodities are attractive to some buyers because of their exclusiveness or high price. If the price goes down, they loose appeal as a status symbol and demand falls.

Question 3

Giffen goods

Answer 3

An essential item that has few/no substitutes, they are purchased by those on low income. When its price rises, the demand also rises. e.g. white bread.

Question 4

Goods influenced by consumers expectations and speculative goods

Answer 4

If prospective buyers think that prices are likely to be higher in the future, in comparison to current prices, the current level of quantity demanded may not even fall if prices increase slightly.

Question 5

Goods of an addictive nature.

Answer 5

Goods to which a person becomes addicted, e.g.drugs, they not longer act rationally. the current quantity demanded may not fall even if prices increase.