Veblen goods

  • A good for which demand increases when its price increases, and vice versa.
  • Luxury goods like diamonds, whose appeal depends on their exorbitant price, are an example. It is named after American economist Thorstein Veblen.
  • Veblen goods are considered exceptions to the law of demand, which states that the demand for a good must decrease as its price increases, and vice versa.
  • Some economists disagree, saying that the law applies only to goods that are truly identical.
  • Cheap diamonds, for instance, may be an inferior good in the eyes of the consumer when compared to expensive diamonds; hence they are not truly comparable.