what is a veblen good 
a veblen good is a good for which demand increases as the price increases due to its exclusive nature and appeal as a status symbol this runs counter to the prevailing circumstance of demand falling as prices rise thus a veblen good has an upward sloping demand curve rather than the typical downward sloping curve a veblen good is generally a high quality coveted product 1 this stands in contrast to a giffen good which also has an upward sloping curve but is a non luxury product with no easily available substitutes 2understanding a veblen goodthe increase in demand for a veblen good reflects consumer tastes and preferences with the higher demand directly attributable to the price increase the term is named after american economist thorstein veblen who is best known for introducing the term conspicuous consumption veblen goods are fairly commonplace unlike giffen goods which are elusive and quite difficult to identify very expensive products that are marketed as being exclusive or convey the appearance of success such as designer jewelry pricey watches yachts and luxury cars can be classified as veblen goods veblen goods are generally targeted at affluent individuals have a very strong brand identity that is synonymous with luxury and are far more likely to be sold in upscale boutiques than in common department stores for all intents and purposes a veblen good is a luxury item that a majority of the population will not or cannot purchase contradiction to conventional market forcesveblen goods contradict the basic law of demand which states that quantity demanded has an inverse relationship with price 3 this is due to the appeal of their exclusivity if the price of a coveted and expensive product is increased it may actually enhance its attraction to those for whom status is important as it is now farther out of reach for the average consumer however if the price of such a product is lowered its reduced exclusivity may result in diminished appeal this can result in it being shunned by status conscious consumers while remaining too expensive for the mass market overall demand would therefore decline with lower prices instead of increasing while no specific price point can be identified as the dividing line between a veblen good and a normal product it may be safe to assume that a veblen good is generally priced exponentially higher than a basic product in the same category take the case of watches good quality watches are widely available for less than 100 but to qualify as a veblen good a watch would probably carry a four five or six digit price tag veblen goods vs giffen goodsas noted above both veblen and giffen goods have an upward sloping demand curve this means that demand for them increases when their price increases their main difference is in the type of good there are numerous examples of veblen goods giffen goods on the other hand are relatively rare some economists even debate whether they exist at all 4causes of the veblen effectstudies indicate that people are happier and receive more utility with the purchase of a veblen good 5 this is a result of the good making the individual feel more exclusive and important secure in the knowledge that they re purchasing something of high quality that is out of reach for others many individuals believe this is worth the premium they pay 