Veblen goods are types of luxury goods. They are uniquely existing in economics and go against the law of demand. As law of demand states, the price of good increases, quantity demanded decreases and vice versa. Veblen goods, for them it is, as the price increases the quantity demanded also increases. The demand curve of these goods is an upward sloping curve.
Consumers prefer these goods more as the price rises because they are high quality products. Opposite to these veblen goods are Giffen goods which are low quality inferior goods.
The purchase of veblen goods are often considered as "abnormal market behaviour" because in the market low price substitutes are easily avialable but buyers stick to the belief that high price means high quality. These goods are often demanded to show a high status symbol.
Few examples of veblen goods are-
rare paintings, luxury cars, designer jewellery, watches etc.
These goods are connected with exclusive brands and are sold in upscale shops rather than in every shop with normal goods.
Few effects that are related to veblen goods are-
1. The snob effect where the goods are preferred because they are different or it can be said they are exclusive.
2. The bandwagon effect where preference increase as the number of people demanding the good increases.
3. The network effect: As the number of buyers increase the price of the good also increases.
4. The common law of business balance: It suggests that if the good is of low price, the buyer have made a quality compromise. Thus high price means high quality.
(Souce: Wikipedia)
Consumers prefer these goods more as the price rises because they are high quality products. Opposite to these veblen goods are Giffen goods which are low quality inferior goods.
The purchase of veblen goods are often considered as "abnormal market behaviour" because in the market low price substitutes are easily avialable but buyers stick to the belief that high price means high quality. These goods are often demanded to show a high status symbol.
Few examples of veblen goods are-
rare paintings, luxury cars, designer jewellery, watches etc.
These goods are connected with exclusive brands and are sold in upscale shops rather than in every shop with normal goods.
Few effects that are related to veblen goods are-
1. The snob effect where the goods are preferred because they are different or it can be said they are exclusive.
2. The bandwagon effect where preference increase as the number of people demanding the good increases.
3. The network effect: As the number of buyers increase the price of the good also increases.
4. The common law of business balance: It suggests that if the good is of low price, the buyer have made a quality compromise. Thus high price means high quality.
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