Luxury brands like designer sun glasses are goods that may exhibit snob effects. Suppose this is true, and the price for a particular brand increases. What happens to the component changes in the quantity demanded?

Question

Quizplus · Accepted Answer

As the price for a particular luxury brand increases, the pure price effect (assuming everything else is held constant) will be negative as the quantity demanded will decrease due to the higher price. However, the snob effect will be positive as the higher price may increase the perceived exclusivity and desirability of the brand, leading to an increase in quantity demanded among those who value the brand for its status symbol. Thus, the overall effect on quantity demanded will be a combination of these two effects, with the pure price effect dominating but the snob effect somewhat offsetting it.

Luxury Brands Like Designer Sun Glasses Are Goods That May