Three (3) Awesome Reasons Why People Buy More When Prices Are Increasing?

This question – “why do people buy more of a product when the price of that product is increasing?” – appears to be funny to many. Is it really possible that people buy more of a commodity when the price of that commodity increases? Is it really sensible to buy more at higher prices? How is it possible to buy more at higher prices with the same amount of income or cash at hand?

From the view point of an ordinary man, people will buy less of a commodity when it is established that the price of that commodity is on the increase. And this is true based on the law of demand of elementary economics. What does this law say? It states that:

1.    People will tend to buy more when the price of the commodity decreases, and

2.    People will tend to buy less when the price of the commodity increases.

Again, left with the same amount of income or the same amount of cash at hand, it is mathematically sensible that people can only buy more at lower prices and less at higher prices. This is the idea of a rational buyer or consumer. A simple illustration will prove this mathematical theory.

Assuming Mrs. Katt has a budget of N5,000.00 for coffee in a year and that the price is N250.00 per coffee container, it follows that Mrs. Katt can only buy 20 containers of coffee for the year. When the price now increases to, say N400.00 per container, then she can only buy 12 and a half containers.

Now let’s get the message clear. Can you buy more of a commodity when the price is increasing? Yes, you can! And what could be responsible for that action, which many think is irrational? Only three factors! And what are they?

First, there are situations when some people buy more of a commodity when the price of that commodity is increasing. It is not that their income is increasing. They have the same amount of income, yet they buy more. The reason is that such category of people will want to distinguish themselves from the public. They always want to show to others that they are better off in the society. With this, they tend to buy more of expensive products with rising prices, trying to show their superiority in the society.

Secondly, there are situations when people buy more of a product when the price of that product is increasing. The more the price is increasing, the more they buy. Why do they do that? They expect that the price will continue to rise. Thus, they continue to buy more at higher prices. An example of this is petroleum product in Nigeria. Whenever there is rumor that there will be scarcity of fuel, people rush to buy. And as more additions are made to the pump price, the more people buy. This is to save them from more increment in the price.

Lastly, there are some kinds of food consumed by some categories of people in the society - the people with low income. Low income earners consume certain types of food, which they consider as necessity to existence. Thus, even if the prices of these goods considered to be necessity are rising, they have no option than to continue to buy. They do this by forgoing some other things they consider not necessary at the moment ie things they can do without.

So, in essence, there are some reasons or factors that push some of us to buy more at higher prices as against the ordinary law o demand in economics.