In economics, Veblen goods are a group of commodities for which peoples' preference for buying them increases as a direct function of their price, as greater price confers greater status, instead of decreasing according to the law of demand. A Veblen good is often also a positional good.
Some types of high-status goods, such as high-end wines, designer handbags and luxury cars, are Veblen goods, in that decreasing their prices decreases people's preference for buying them because they are no longer perceived as exclusive or high status products. Similarly, a price increase may increase that high status and perception of exclusivity, thereby making the good even more preferable. The Veblen effect is named after the economist Thorstein Veblen, who first pointed out the concepts of conspicuous consumption and status-seeking.
However, this 'anomaly' is mitigated when one understands that the demand curve does not necessarily have only one peak. The goods generally thought to be a Veblen good are still subject to the curve since demand does not increase with price infinitely. Demand may go up with price within a certain price range, but at the top of that range the demand will cease to increase before it begins to fall again with further price increases. At the other end of the spectrum, it is obvious that were luxury items priced equal to generics, the giant mass of the people would buy the luxury items, even though a few Veblen-seekers would not. Thus, it is illustrated that even a Veblen good is subject to the dictum that demand moves conversely to price although the response of demand to price is not consistent at all points on the demand curve.
copy from Wikipedia, the free encyclopedia
Some types of high-status goods, such as high-end wines, designer handbags and luxury cars, are Veblen goods, in that decreasing their prices decreases people's preference for buying them because they are no longer perceived as exclusive or high status products. Similarly, a price increase may increase that high status and perception of exclusivity, thereby making the good even more preferable. The Veblen effect is named after the economist Thorstein Veblen, who first pointed out the concepts of conspicuous consumption and status-seeking.However, this 'anomaly' is mitigated when one understands that the demand curve does not necessarily have only one peak. The goods generally thought to be a Veblen good are still subject to the curve since demand does not increase with price infinitely. Demand may go up with price within a certain price range, but at the top of that range the demand will cease to increase before it begins to fall again with further price increases. At the other end of the spectrum, it is obvious that were luxury items priced equal to generics, the giant mass of the people would buy the luxury items, even though a few Veblen-seekers would not. Thus, it is illustrated that even a Veblen good is subject to the dictum that demand moves conversely to price although the response of demand to price is not consistent at all points on the demand curve.
copy from Wikipedia, the free encyclopedia
No comments:
Post a Comment