Question

Some goods are bought largely because they have “snob appeal.” For example, the residents of Beverly Hills gain prestige by buying expensive items. In fact, they won’t buy some items unless they are expensive. The law of demand, which holds that people buy more at lower prices than higher prices, obviously doesn’t hold for the residents of Beverly Hills. The following rules apply in Beverly Hills: high prices, buy; low prices, don’t buy. Discuss.

Answer 1

Rather than understanding about the price this is more related to that of behavioural aspect of the individual and in this regard the product is no longer tied to the law of demand where the rationality behind this would be satisfying someone's need and this is more of a behavioural aspect to justify their ability to pay a and their demand for only super luxury items where the aspect of consumer has been studied thoroughly over years where this can seem irrational to a rational customer which goes against the assumptions of Economics that individuals are rational where the on psychological need forces the individuals to act in such a way in Beverly hills on the whole.