Final answer:
Manufacturers and retailers use the notion of 'fashion' to increase the perceived value of a product, enabling them to raise its price. This is due to the association of higher prices with better quality or status in the eyes of consumers, particularly when market information is imperfect.
Step-by-step explanation:
The notion of 'fashion' has been strategically employed to augment a product's perceived value, thereby permitting the manufacturer and retailer to increase the price. Customers often make inferences about a product's quality based on its price.
In a scenario where there is imperfect information in the market, a higher price may be interpreted by consumers as an indicator of superior quality. Conversely, if a shop were to lower its prices, it might be misinterpreted as a sign of poor quality, potentially deterring buyers.
This perception ties closely with the marketing strategies of the 1920s, where marketers used emotions and the allure of a lifestyle to sell products. They capitalized on the desires and dreams of consumers, suggesting that their products could provide status and enhance their life, beyond the items' utilitarian purpose. As a result, products that were associated with fashion and lifestyle improvement could command higher prices because they were perceived as offering hope and a better standard of living.
Examples include everyday items like clothing, furniture, and household goods which, through mass production, became accessible to the working class yet could still be sold for higher prices if associated with fashion or prestige. Such products imitated the styles of the middle class and promised to elevate the buyer's status.