Veblen Good (Economics) - Explained
What is a Veblen Good?
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What is a Veblen Good?
A veblen good refers to a good that experiences an increase in demand when the price increases.
What Types of Goods are Veblen Goods?
A veblen good is usually a premium quality product or a luxury product.
Demand Curve for a Veblen Good?
A veblen good is represented by a demand curve that slopes in an upward direction.
Who Identified Veblen Goods?
Thorstein Veblen, an American economist, came up with the term conspicuous consumption, and the term veblen goods got recognition after his name.
What are some Examples of Veblen Goods?
Anything that is too pricey such as designer outfits, branded watches, luxury cars, etc., and that represent more self-esteem, or have a unique identity are considered to be veblen goods.
What is the Target Market for Makers of Veblen Goods?
The target customer base for veblen goods is wealthy people. Such goods have a powerful identity of their own, and represent class and luxury.
Where Will you Find Vleben Goods?
One can find Velben goods in high-end showrooms, and not in basic department stores.
How Veblen Goods Affect Conventional Market Forces
Veblen goods go against the general law of demand that says that an increase in the price of a good will have a negative impact on its demand, or will reduce the demand. In contrast, the increase in the price of an expensive product will influence brand-conscious people to buy more of it.
However, a reduction in the price of veblen goods will decrease their demand, and brand-conscious individuals will no longer be interested in buying that product. However, in spite of this price fall, veblen goods will still be expensive for other customers.
Hence, the aggregate demand for veblen goods will decrease when their prices fall. There are no particular price standards that differentiate between veblen goods and normal goods. However, we can assume that the price of a veblen good is many times more than that of a normal good.
For instance, while the price of a watch with reasonable quality will be up to $100, the price of a veblen good (watch in this case) will have a heavy price tag of around 4-6 digits.
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- Efficiency Principle
- Indifference Curve
- Time Preference Theory of Interest
- Diminishing Marginal Utility
- Sunk Costs
- Production Possibilities Frontier
- Law of Diminishing Returns
- Economic Efficiency
- Efficiency Theory
- Productive Efficiency
- Capacity Utilization Rate
- Pareto Efficient
- Comparative Advantage
- Criticisms of the Economic Approach
- Behavioral Economics
- Normative Economics
- Positive Economics
- Invisible Hand
- Sunk cost