Price as Quality Index

Price as Quality Index Assignment Help

Home / Microeconomics Assignment Help / Price as Quality Index

When price is Taken as an Index of Quality?

Every one of us is willing to pay a higher price for a better quantity product. But when the product is non- standardized and non-homogeneous, it is not possible for every one to assess its quality. Therefore, some people start believing that a product whose price is high must be a higher quality product. thus when price is taken to be index of quality, people may buy more or the high price products than similar products with lower prices on the false belief that high price products are better. Hence demand will be high at higher prices than at lower prices than at lower prices. This is thus against the normal price quantity relationship and forms an exception to the law of demand.

Many other such cases where goods are purchased at higher prices, even when similar low price goods are available due to status consciousness and peer pressures (like branded goods), fashion products (like designer clothes); and goods purchased without much reference to prices (e.g. under medical or other emergencies) may not strictly be in accordance with the of demand. Thus all such examples are taken as exceptions to the law of demand.


Submit Homework

Submit your homework for a free quote