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Veblen Goods: Examples & Demand Curve

Instructor: Yuanxin (Amy) Yang Alcocer

Amy has a master's degree in secondary education and has taught math at a public charter high school.

Read this lesson to learn how some super expensive products actually sell more at its higher price versus at a lower price. Learn why this is so and why people choose to purchase these high price items.

Definition

Would you ever think of buying something mostly because it is expensive?

By definition, a Veblen good is an exclusive high-quality product that sells more at high prices. If these same products were offered at lower prices, they wouldn't sell as much. Veblen goods are similar to Giffen goods except that Veblen goods are of high quality while Giffen goods are of low quality. But both have a rising demand curve because both sell more as prices rise.

Veblen goods are named after economist Thorstein Veblen who also came up with the term 'conspicuous consumption', meaning something that is bought specifically to show off its purchase.

Demand Curve

Unlike the traditional demand curve which curves downwards, the Veblen good has a rising demand curve.

Veblen goods demand curve. The x-axis is the price and the y-axis is the quantity sold.
Veblen demand curve

As the price goes up, so does the quantity demanded. This means that more people end up buying as the price increases. As you can imagine, being able to create a Veblen good is great for business. The higher the price of the item, the more profit the company makes!

Status Symbols

So, what kinds of products generally become Veblen goods? Typically, Veblen goods are status symbols. People purchase these products to show others that they have money or are of a certain high class status.

Because of its high price and role as a status symbol, you typically won't find a Veblen good for sale at your local department store. No, these items are sold to the wealthy, usually at upscale boutiques that target high class people.

Also, because of its role as a status symbol, lowering the price of a Veblen good diminishes its desirability in the eyes of the wealthy. It is no longer a symbol of extreme wealth since the lower price means more people can purchase the same item.

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