Veblen goods

In economics, Veblen goods are types of material commodities for which the demand is proportional to its high price, which is an apparent contradiction of the law of demand; Veblen goods also are commodities that function as positional goods. Veblen goods are types of luxury goods, such as expensive wines, jewelry, fashion-designer handbags, and luxury cars, which are in demand because of the high prices asked for them. The high price makes the goods desirable as status symbols, by way of conspicuous consumption and conspicuous leisure; conversely, a decrease of the prices of Veblen goods would decrease demand for the products.

In an economy, the consumption of Veblen goods is a function of the Veblen effect (goods desired for being over-priced) that is named after the American economist Thorstein Veblen, who first identified conspicuous consumption as a mode of status-seeking in The Theory of the Leisure Class (1899).

Price increases can raise the status and perception of exclusivity of an item, making it highly preferable. Even with low prices, such as when luxury items are the same price as non-luxury items, they likely would still be more highly sought after (all else being equal). A Veblen good is still subject to the law of demand, but the response of demand to price is not consistent at all points along the demand curve.

The Veblen effect is one of a family of theoretically possible anomalies in the general theory of demand in microeconomics. Other related effects include:

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