In what way does the demand curve for prestige pricing differ from the typical demand curve?

• A. It is always downward sloping, just like the typical demand curve.
• B. It is perfectly inelastic, meaning quantity demanded remains constant regardless of price.
• C. It is perfectly elastic, meaning quantity demanded does not change with price.
• D. It slopes upward over some range, indicating that higher prices can increase quantity demanded due to perceived prestige.

Answer: (D)

Verified step by step guidance

1. Recall that a typical demand curve is downward sloping, which means that as price increases, quantity demanded decreases, reflecting the law of demand.
2. Understand that prestige pricing is a strategy where higher prices can make a product more desirable because consumers perceive it as more prestigious or of higher quality.
3. Recognize that due to this perception, the demand curve for prestige pricing can slope upward over some range, meaning that an increase in price can lead to an increase in quantity demanded.
4. Contrast this with perfectly inelastic demand, where quantity demanded does not change with price, and perfectly elastic demand, where quantity demanded changes infinitely with price; neither of these describes prestige pricing demand.
5. Conclude that the key difference is that the demand curve for prestige pricing is not always downward sloping; instead, it can slope upward over some price ranges due to the positive effect of price on perceived value.