Named after economist Thorstein Veblen, who introduced the term “conspicuous consumption,” a Veblen good is one whose demand increases as its price increases because consumers see it as an exclusive status symbol. Unlike most goods, which have a downward-sloping demand curve because demand goes down as price goes up, a Veblen good has an upward-sloping demand curve.
Veblen goods are high quality, coveted items. They are designer, luxury items with a strong brand identity, and they are not sold in regular stores. These goods are priced so high that only the very affluent can afford them; the higher their price, the less likely other consumers can afford them, and the more buyers perceive them to signal great wealth and success. If a Veblen’s good price decreases, demand will decrease because status-conscious consumers will see it as less exclusive.
Price elasticity of demand describes how changes in the cost of a product or service affect a company's revenue.
The wealth effect is a psychological phenomenon that causes people to spend more as the value of their assets rises. The premise is that when consumers' homes or investment portfolios increase in value, they feel more financially secure, so they increase their spending.
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