Sunday, October 16, 2011

Beamer, Benz, or Bently... how bout neither?

As many of us teenagers know, Beamers, Mercedes Benz, and Bently's are the hottest cars on the planet earth. These luxury goods are the status symbol of our favorite rappers and celebrities in the 21st century. People like Tom Cruise, Rick Ross, Lil Wayne, and many more show off their luxury cars regularly, causing a "demand" amongst young kids all over the world. I put quotes around "demand" because it really is not a demand that kids have... its a fairy tale and a dream. Demand is something people have the ability to purchase with their current wealth, which very few have. Therefore, Beamers, Mercedes Benz, and Bently's will never be in demand with young people. Less than 3 percent of the world can afford such luxury items. This may have you thinking, if only three percent of people can buy these goods, how do they stay on the market and make any money? The answer is simple. Luxury goods always stay above the market, when I say this, I mean that supply and demand of these more expensive items are above the regularly priced car lines. For example, a Ford Focus is a middle class commonly bought car. This opens up a much larger economic class who can afford to purchase this car, causing the supply to fluctuate depending on the demand. This is not the case for luxury goods, which are perfectly inelastic because as opposed to the supply being the manipulated variable, demand is the manipulated variable for luxury goods. This is the reason that people are on lists just to get the opportunity to purchase some of the most luxurious Beamers, Benz, and Bently's.

2 comments:

Cameron said...

I agree with you on some points, but disagree on others. I agree that teenagers do look up to the people who drive these cars and when they get to the age that they can drive want to be those celebrities who drive them. But I believe that more luxury cars like these go up and down in demand more, than cars that more middle class people would drive. Luxury cars are obviously expensive, and depending on the market, the rich people, if the market is bad, may not be able to afford these types of cars. In this instance, these types of people would, if they are money smart, would rather buy the cheaper car to help them save money in hard economic times. In this way the economic car would be more inelastic, than the higher end luxury car. That is just my opinion. Overall I think that this is a solid post, I just slightly disagree on your evaluation on inelasticity.

Beys said...

Thanks Cameron, as I did some more research I realized your point is somewhat valid against my evaluation on inelasticity. But I cannot help but to go back to what Mr. Ostroff said in class about how "Luxury Items Never Go On Sale!" This being said, demand must be inelastic, or none of these luxury cars will ever sell and will have to go on sale...