Question

Show, using the market for big-screen televisions, why the price is higher when a product is first introduced than after months or years

Answer 1

When a product like big-screen television is newly introduced in the market there is huge market demand for such products . Televisions are luxury goods which have a high price elasticity and high income elasticity of demand . When a new model is introduced in the market , this model is considered to be distinctively superior and very high is quality . People do not find any close substitutes for this product . So demand for this product rises . This causes the price to be high . Then after few months due to constant upgradation of technology another better model is introduced , also the sudden hype for the product subsides , this causes both demand and price to fall .