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The prices for these luxury goods are getting more expensive rather than cheaper, so why are these sales escalating? Population growth is one possibility as the greater the population, the greater the demand

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Rahim Ladhani 3S1 Source: The Toronto Star Title of Article: Conspicuous Consumption Date of Article: Friday September 16th 2005 Submission Date: Thursday November 3rd 2005 Society today is based on the fundamental concept of supply and demand. If the demand increases the quantity supplied will rise. If the demand decreases the quantity supplied will diminish. However, the fluctuation in demand for all products is based on numerous factors such as price, population, income, advertising and more influential than price, taste. The Toronto Star printed an article on luxury items and how these extravagant goods are now in higher demand than ever before. Expensive brand names such as Lamborghini, Prada and Tiffany & Co as well as castles are having a vintage year. Lavish homes in the Toronto area that are worth $1.5 million were up 48 per cent in the first half of 2005. ...read more.


If one makes a large amount of money they are more likely to spend more compared to the person makes less. This cycle is referred to as the income effect. Individuals personal tastes have grown more expensive and companies have realised that there are those who wish for a taste of the 'good life' and as a result have created lower-end or diffusion brands to appeal to the cash-strapped consumer. President and CEO of the Retail Council of Canada, Diane Brisebois, commented on this marketing invention. "They have recognized that there is this huge middle market that wants to experience that kind of luxury and sophistication, and want access at a different price point." Demand Curve Luxury Goods A change in any factor affecting demand resulting in a change in quantity demanded (Q) ...read more.


This shows an excess of demand, and supply may not satisfy demand. This shortage could start an auction atmosphere, where the demand at this price is pushed up towards the equilibrium. Supply and Demand Luxury Goods At the equilibrium, the quantity supplied meets the quantity demanded. A surplus means that there is an excess of supply, that is, the supply goes beyond the demand expectations. This would result in the lowering of prices to effectively sell the supply. Although right now they are increasing at great rates, analysts agree that the very high end of the market will be the first to be hit if the economy suddenly takes a nosedive, since discretionary purchases are generally the first to go. This thought probably enters the mind of every company head each and every day, but until that day comes they will keep enjoying their continued success of the brilliant concept of supply and demand. ...read more.

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