Answer to Question #269408 in Microeconomics for dodo

Question

Use demand and supply curves to illustrate and explain why rare items, such as the Mona Lisa painting by Leonardo da Vinci, are sold at such high prices

Answer 1

The nature of a product determines its elasticity of demand and Mona Lisa paints can be considered as luxurious goods with best qualities that awarded it brand loyalty. Any increase in price could only suggest that that the quality has improved thereby attracting increased demand. This type of elasticity of demand can be described as price inelasticity of demand. For price inelasticity of demand, quantity demanded is not affected by the prices, its is either constant or can increase.

Otherwise price elasticity of supply is a factor that has enabled the Mona Lisa Paints to have positive demand irrespective of price changes. Leonardo da Vinci is a prominent artist business popular known to provide a unique paint that no perfect substitute can be produced by another supplier. Moreover, the artist, Leonardo da Vici died and his work are only duplicates and the supply are not affected by the prices and thus exhibit perfect price inelastic supply.