Hello

Currently studying an A Level in Economics and I have now come across the wonderful concept of Elasticity and all its different variations.

Could someone please explain to me why a Rolex Watch is classed as Price Elastic?

My initial thought is that a Rolex Watch is Price Inelastic, this is a niche product aimed at the rich. If the price goes up, for example by 10%. Will this put off a buyer? People buying a Rolex Watch would probably not care about a price change, hence my initial thought of it being price Inelastic.

But apparently I am wrong...

So basically, a Rolex watch is price elastic, because of the fact there are other brands of premium watches?

@ Matthew

I'm with you on this.

My interpretation of demand for Rolex watches would be that they are relatively price inelastic.

I would like to read the view that you are receiving saying that Rolex would be price elastic.

goods of ostentation are usually relatively inelastic.

I have to declare that I hold a degree in Economics.

I hope this helps...... stick to your guns unless the other person can give you a well thought out argument.

Kind regards

Mark

A man went into a car showroom and asked the salesman: "How much is that Rolls Royce"?
The salesman replied: "If you have to ask the price, you can't afford it"
What this means is that owing to RR's being produced in limited numbers only the super rich will get the opportunity to purchase a new one regardless of what it cost to make. The price paid is of secondary importance.
I learn't a long time ago that price has nothing to do with production costs. It's all about how much someone is prepared to pay.
Now, take the case of a Rolex watch. Say for instance the firm recommends a retail price of £10,000 based upon the number they can supply the market with set against expected sales. For example the cost of production plus profit is £5,000 then the retail mark up would be 100% making an initial selling price of £10,000
This would allow plenty of leeway should sales fall short of the expected volume. The salesman can then offer a substantial discount and the prospective buyer will think that he is getting a bargain, even though the retailer's overall sales and profitability are relatively constant.
Interestingly a pre-war Rolex oyster watch was presented to a dealer yesterday on Dickinson's Real Deal. It was not working, the strap was worn out, the dial and case tarnished and scratched. Had it not had Rolex written on it, anyone would of said: "It's rubbish, put it in the bin"
However, the dealer offered £50 for it, which the seller refused. It was sold at auction for over £200 Which goes to show that rarity and established quality names are the two most important factors in determining price.

A bit late perhaps, but I agree with the first response from sgjhaghsdg.

A Rolex can be price elastic if people are prepared to buy a similar product, such as an Omega, instead. This is due to the brand loyalty (or lack of it).

Kellogg's corn Flakes, if I remember correctly, are very price inelastic despite being cheap, because even if Kellogg's raised the price significantly, buyers would still generally want Kellogg's Corn Flakes instead of supermarket own-brand corn flakes or other substitute products.