Monday, October 10, 2011

Are You A God?

In most all cases, a luxurious car, such as the Bugatti Grand Sport, is so pricey that even some of the wealthiest people hesitate when looking at the $2 million price tag. When a professional racecar driver, Butch Leitzinger was graced with the rare opportunity to drive around in one of these, he received some wild reactions. He said that when he was stopped at a traffic light, a girl in the car next to him asked, “Are you a god?”. With pure grain leather all around, a top speed of up to 267.85 mph, and the ability to go from 0 to 62 mph in 2.7 seconds, this special car is put on the top of the list for most expensive vehicles of 2011-2012 (thesupercars.org). So, if it’s so expensive, why even buy it? It is considered a luxury good, like Gucci and Jimmy Choo, with an expensive name that goes with it. For that reason, those who can afford it and are willing to pay the extra money, spend it for a reputation and ego. If they were to lower the price, perhaps more people would buy it, giving us an example of the law of demand. At the same time, it would take away from the glory of the car. Because of lack of sales, the company chooses to only sell one model at a time with a very limited supply. They know that, because of consumer sovereignty, many will not be sold, making perfect sense. Do you think Bugatti is doing it's best to maximize their profit?

4 comments:

Larson McQuary said...

The fact that society is willing to pay $100 dollars more for a good just because it's designer totally goes against the basics of economics. I think your example of cars is one of the most apparent examples of how people spend more money based on the name behind the good.

Megan Riney said...
This comment has been removed by the author.
Megan Riney said...

I agree with Larson. The fact that people will spend hundreds of thousands, let alone 2 million dollars for a car with a luxury designation, is ridiculous but is an incentive for buying the good in the first place. Bugatti specifically is making a smarter decision to limit their supply, because their damand is far under equilibrium due to the price. Also,although selling one model at a time means that that one model will be very expensive, it is one of the factors that perpetuates the item being considered "luxury". I believe that Bugatti should lower the price enough to make it more affordable for the general public, but not so much that it will no longer be considered a luxury type good.

Molly Aaron said...

You guys are right, it's pretty rediculous that someone would even think about owning a car a price even remotely similar to this. The ones who are fortunate enough to own such a beauty have either come from great wealth or have worked their butts off to make it this far. Perhaps lowering the price by a few thousand would be great, but at the same time, those decimals are part of what make the Bugatti, and other luxury goods for that matter, so delectable.