Veblen good facts for kids
Imagine something that becomes more popular when its price goes up! That's a Veblen good. In the world of economics (which is about how people make, buy, and sell things), a "good" is just something you can buy, like a toy or a car. Usually, if something costs more, people buy less of it. This is part of the Law of Supply and Demand. But Veblen goods are different! People want them more when they are expensive.
These special goods are named after Thorstein Veblen. He was a thinker who wrote about this idea in 1899. He called it "conspicuous consumption", which means buying expensive things to show off your wealth. Veblen goods are often also positional goods. This means their value comes from being rare or showing your place in society.
Contents
What Makes a Veblen Good Special?
A Veblen good goes against the usual rules of buying and selling. Normally, if the price of a cool new video game goes up, fewer people will buy it. But for a Veblen good, if the price goes up, more people might want it! This happens because the high price itself becomes part of what makes the item desirable.
Why Do People Buy Veblen Goods?
People buy Veblen goods for a few main reasons:
- Status: Owning something very expensive can show others that you are wealthy or important. It's a way to gain social status.
- Exclusivity: High prices mean that not everyone can afford the item. This makes it feel special and exclusive to those who own it.
- Quality (Perceived): Sometimes, people believe that a higher price means better quality, even if it's not always true.
Showing Off Wealth: Conspicuous Consumption
The idea of "conspicuous consumption" is key to Veblen goods. It means buying and using expensive things to show off your wealth and power to others. Think of someone buying a super fancy watch or a very rare piece of art. They might buy it not just because they like it, but because it shows everyone how much money they have.
Examples of Veblen Goods
Many luxury items can be Veblen goods.
- High-end fashion: Designer clothes, handbags, and shoes from famous brands often cost a lot. Their high price makes them more desirable for some people.
- Luxury cars: Cars like the Rolls-Royce Phantom in the picture are very expensive. Owning one shows a lot of wealth.
- Expensive jewelry: Rare diamonds or unique pieces of jewelry can be Veblen goods.
- Exclusive art: Paintings or sculptures by famous artists can cost millions. Their high price adds to their appeal for collectors.
Are All Expensive Things Veblen Goods?
No, not every expensive item is a Veblen good. For example, a very expensive medical treatment is not a Veblen good. People pay for it because they need it, not because they want to show off or because its high price makes it more appealing. A Veblen good's demand actually increases with price, which is the key difference.
How Veblen Goods Affect the Market
Veblen goods create a unique situation in the market. Companies that sell these items might actually raise their prices to make them seem even more desirable. This is different from most businesses, which try to lower prices to attract more customers. For Veblen goods, the high price is part of the product's appeal.
See also
In Spanish: Bien de Veblen para niños
