If you’ve got it, flaunt it!

Luxury cars are often given as examples of goods which don’t follow the normal rules of demand and price; demand for them can be very income elastic due to their price, which generates a certain amount of status, so if price rises demand can actually rise rather than fall – the owner enjoying their ostentatious consumption. A report in the Times bears this out very neatly. Yesterday Porsche released sales figures for 2008 – the Porsche Boxster is clearly a ‘normal’ good at the cheaper end of their range (as little as £30,000), and its sales have followed the pattern of most of the automotive industry and collapsed from 9,835 to 3, 950 (a 60% fall) whilst the 911, which the Times report calls a ‘real Porsche’ and costs up to £90,000, fell only 17% from 16,261 to 13,543.

Moving up the scale, Ferrari (£200,000 plus) sold 6,587 cars, only 2% fewer in 2008 than in 2007, and Rolls Royce sold 1,200 cars worldwide, a 20% increase. The commentary in this article suggests that as an ‘aspirant’ car, the Boxster is for those on the way up with volatile incomes, while the Ferrari or Rolls is for those who have already arrived (and Premier League footballers), and are happy to let other road users know that.