The laws of supply and demand dictate that when prices go up, demand goes down. This is one of the many laws of supply and demand that have reduced the profitability of all manner of business for decades. Like other laws of supply and demand and indeed traditional economics – this one is often wrong. […]

The laws of supply and demand dictate that when prices go up, demand goes down. This is one of the many laws of supply and demand that have reduced the profitability of all manner of business for decades. Like other laws of supply and demand and indeed traditional economics – this one is often wrong. A famous Stanford University study considered two groups and wines at two price points each. Consumers were asked to rate the wines on a scale of 1 to 6 – giving rise to the following findings: Wine 1 Priced at $5.00 – received an enjoyment rating of 2.25 out of 6. Priced at $45.00 – received an enjoyment rating of 3.5 out of 6. Wine 2 Priced at $10.00 – received an enjoyment rating of 2.5 out of 6. Priced at $90.00 – received an enjoyment rating of 4.1 out of 6. The traditional view, the one…