What is the standard neoclassical understanding of demand for a commodity?

What is the standard neoclassical understanding of demand for a commodity? How does a Veblen good challenge this understanding? Use one of the features of the political economy approach to explain. (Answer in 5-6 sentences.)

Expert Solution

The neoclassical school talks about the law of demand which states that price and quantity demanded of a good have an inverse relationship. However, this theory is contradicted by certain goods which are classified as Veblen goods. These goods indicate abnormal market behavior where consumers purchase the higher-priced goods even when similar low-priced (but not identical) substitutes are available. It is caused either due to the belief that higher price means higher quality, or for conspicuous consumption (to be seen as buying an expensive, prestige item). "Conspicuous consumption" often resulted in "conspicuous waste", which Veblen detested. This goes hand in hand with political economy which studies how economic theories such as capitalism play out in the real world and bring about phenomena like the Veblen effect.

Rahul Sunny answered 2 years ago

The standard deviation of quarterly changes in the price of a commodity is $0.65, the standard...

The standard deviation of quarterly changes in the price of a commodity is $0.65, the standard deviation of quarterly changes in a futures price on the commodity is $0.81, and the coefficient of correlation between the two changes is 0.8. What is the minimum variance hedge ratio for a 3-month contract

When an increase in price of one commodity decreases the demand for another commodity (negative cross...

When an increase in price of one commodity decreases the demand for another commodity (negative cross price effect), then two commodities are substitute goods True False When the increase in price of one commodity decreases the demand for another commodity (negative cross price effect), then the two commodities are said to be complementary goods True False An increase in income of consumers will result in an increase in demand of a commodity only if, it is considered as a superior...

which of the following is not a characteristic of a commodity the demand for which is...

which of the following is not a characteristic of a commodity the demand for which is elastic

The price of a commodity is determined by the interaction of supply and demand in a...

The price of a commodity is determined by the interaction of supply and demand in a market. The resulting price is referred to as the equilibrium price and represents an agreement between producers and consumers of the good. a) Identify an event that involves prices that you have observed in the news, history, or your life that might be explained with Supply and Demand. Your answer needs to provide at least two paragraphs. The first paragraph discusses your observation. The...

Market demand and supply for a commodity are given by the following equations: Demand: X =...

Market demand and supply for a commodity are given by the following equations: Demand: X = 30 – (1/3) P Supply: X = -2.5 + (1/2) P where X= quantity (units), and P=price per unit ($) Suppose that the government is planning to impose a tax on this commodity and considering the following two options: Option 1: A unit tax of $15 Option 2: An ad valorem tax of 20% a) Find the tax incidence on buyers and producers, and...

Suppose the market demand for a commodity is given by the download sloping linear demand function:...

Suppose the market demand for a commodity is given by the download sloping linear demand function: P(Q) = 3000 - 6Q where P is a price and Q is quantity. Furthermore, suppose the market supply curve is given by the equation: P(Q) = 4Q a) Calculate the equilibrium price, quantity, consumer surplus and producer surplus. b) Given the equilibrium price calculated above (say's P*), suppose the government imposes a price floor given by P' > P*. Pick any such P'...

1. Market demand and supply for a commodity are given by the following equations: Demand: X...

1. Market demand and supply for a commodity are given by the following equations: Demand: X = 30 – (1/3) P Supply: X = -2.5 + (1/2) P where X= quantity (units), and P=price per unit ($) Suppose that the government is planning to impose a tax on this commodity and considering the following two options: Option 1: A unit tax of $15 Option 2: An ad valorem tax of 20% a) Find the tax incidence on buyers and producers,...

Use orthodox neoclassical labor supply and demand graphs to explain what would happen to employment and...

Use orthodox neoclassical labor supply and demand graphs to explain what would happen to employment and output if we repealed all minimum wage laws.

What is the difference between commodity, commodity backed and fiat currency? What are the positives and...

What is the difference between commodity, commodity backed and fiat currency? What are the positives and negatives of using each type?

Compare and contrast efficiency standard, safety standard, neoclassical sustainability and Ecological sustainability in answering the question...

Compare and contrast efficiency standard, safety standard, neoclassical sustainability and Ecological sustainability in answering the question “how much pollution is too much?” Discuss the decision rules for each standard and their implementation tools.

Question