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Question
‘Price is an indicator of quality.’ The statement applies to ______.
Options
Bandwagon effect
Snob effect
Veblen effect
Giffen effect
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Solution
‘Price is an indicator of quality.’ The statement applies to Snob effect.
Explanation:
In microeconomics, the snob effect refers to consumers’ demand for rare and expensive products to differentiate themselves from the majority. The product’s pricing indicates its quality. Consumers value uniqueness and choose to pay more.
RELATED QUESTIONS
Distinguish between:
Inferior goods and superior goods
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Questions:
- Diagram’ A ‘represents _____in demand (1m)
- Diagram ‘B’ represents _____in demand (1m)
- In diagram ‘A’ movement of demand curve is in_____ direction (1m)
- In diagram ‘B’ movement of demand curve is in______ direction (1m)
PASSAGE
Mona visits a shopping mall near her residence. She shops for monthly groceries which include rice, wheat, sugar, cooking oil and pulses. She purchases additional quantities of sugar much more than her monthly requirement anticipating that prices may rise in the coming days due to festivities.
She observes two different qualities of tur dal out of which one quality is inferior and the other is superior. She does not purchase the low quality tur dal even though its price is comparatively lower. Instead she prefers to buy superior quality tur dal.
- Identify the exception to the law of demand in the given passage with reference to purchase of additional quantities of sugar much more than monthly requirement anticipating that prices may rise in the coming days due to festivities (1mark)
- Identify the kind of good with reference to low quality tur dal (1mark)
- Express your personal opinion based on the above information. (2 marks)
State with reason whether you agree or disagree with the following statement:
When price of Giffen goods fall, the demand for it increases.
State with reason whether you agree or disagree with the following statement:
When price of Giffen goods fall, the demand for it increases.
What is contraction in demand?
Why are prestige good an exception to the law of demand?
Which of the following best describes a Giffen good?
What happens to the demand for necessities like salt or electricity when their prices increase?
Which situation is an example of speculation affecting demand?
