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Let's talk microeconomics!!!

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Postby funatic » Thu Dec 02, 2004 6:11 pm

I would not debate that economic profits are used. But as you said and I agree, economic profits are assumed to be used, therefore profit maximizing assumes economic-profit maximizing.

As for the assumption of price decreasing => demand increasing, only a Giffen good violates this. This is by definition. Also, a Giffen good is and can be proved to be an inferior good. Perhaps a luxury item could have that property, but if it did, it would be an inferior good in that interval. Just by definition. It cannot hold that property forever, nor can any good for that matter.

Another example of a Giffen good is leisure, and I can't decide if economics on a baseball forum is counted as leisure... :-°
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Postby acsguitar » Thu Dec 02, 2004 6:22 pm

Economics wow...never thought this thread would get this far...I say close it as it makes me sad
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Postby LBJackal » Thu Dec 02, 2004 6:33 pm

Just looked it up and it's not called a luxury good, it's called a veblen good. When the price increases it makes people want to buy it because it gives them social status. Therefore lowering the price would decrease the demand. I assume it rarely happens, and probably only shows up over certain price intervals, but it's out there.
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Postby BigMusky » Thu Dec 02, 2004 6:40 pm

When the price increases it makes people want to buy it because it gives them social status

can you say H2 ?
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Postby LBJackal » Thu Dec 02, 2004 6:48 pm

BigMusky wrote:When the price increases it makes people want to buy it because it gives them social status

can you say H2 ?


Yeah that's the example my prof used. Well, he said Cadillac, not Hummer. Basically, everybody who can afford it at 50K can afford it at 55K, and by raising the price higher than other luxury cars it becomes "better" so most of the people who bought it at 50K still buy it at 55K, and people who now like the car more because it costs more buy it at 55K. There are obviously a few who won't buy it simply because of the increase in price, but thsoe people are superseded by the increase in people who want it because of the increased status it carries.
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Postby Cornbread Maxwell » Fri Dec 03, 2004 11:49 am

good stuff fellas. LBJ is right regarding the price elasticity of some luxury items.
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Postby BigMusky » Fri Dec 03, 2004 12:58 pm

That was the downfall of Oldstyle. It used to be one of the most popular beers and when Bud and Miller raised there prices Old Style didnt and people started thinking it was cheap beer. Happened to several Milwaukee Beers. That is why Bud will never be cheaper then Miller. I still drink it though.
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Postby acsguitar » Fri Dec 03, 2004 2:06 pm

My favorite MicroMachine is the red porche
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Postby StlSluggers » Fri Dec 03, 2004 3:34 pm

acsguitar wrote:My favorite MicroMachine is the red porche

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