Veblen good
As Veblen effect is known in the economics and there especially in microeconomics, the phenomenon that the demand for certain goods under certain circumstances, despite a price increase derselbigen rises because consumers prefer to emphasize through the consumption of expensive goods to their status in relation to other individuals.
From the effect of affected goods are also called Veblen goods. The name of the effect goes back to the American economist Thorstein Veblen, who first described the phenomenon in 1899.
Historical Background
Veblen noted in his 1899 published The Theory of the Leisure Class on the superior pecuniary class (superior pecuniary class ):
Description
Demand curves are classically falling in the sense that the demand goes down lower, the higher the price of the good in question is ( law of demand ). The demand function is at the same time only depends on the price of the requested material, or - you want goods overarching effects involve - depending on the price of all goods. If a Veblen good character, the demand of the consumers is i but also depends on the demand with respect to the other users or the difference between its own demand and the average demand of the goods.
This relationship is illustrated in Figure 1. Consider first the classical market demand curve; is the demand at the initial price. Due to the price increase to occur accordingly to a decline in demand (movement on the curve). In Veblen case this consideration, however, is not sufficient. Due to the demand for other consumer with classic course of the demand curve amplified from the perspective of the considered consumers the exclusivity of the goods and the demand curve shifts to the hypothetical to the right ( ) because the estate itself has become more attractive due to the price increase - a luxurious bag for the price is exemplarily spoken, so to speak, another, more desirable good as the same bag at a lower price. In this case, the equilibrium quantity increases from to. The result follows the orange demand curve that is ascending. Note that the Veblen good violated only in the result, the law of demand; as is evident from the foregoing consideration, the Veblen - case can certainly deconstruct so that the law of demand is maintained at each step.
Usually, such a rising curve is of course can also occur in Veblen goods only locally. In Figure 1, one can also realize this. If you move there ever on the original demand curve to the upper left, the Veblen effect can effect the price at some point no longer compensate.
A good whose individual value results solely from the relationship between the ratio of final consumption to its consumption by others, is called a pure Veblen good. In a utility function you implement this regularly by the definition of the benefits than the average consumer of the goods in society.
Distinguish from the Giffen case
In addition to Veblen goods, there are also other goods, which are characterized by abnormal demand behavior. An example of this form so-called Giffen goods whose demand curve also gain elevation. The effects of the two underlying mechanisms, however, are fundamentally different: Giffen goods are inferior, that is, the demand for them increases with increasing income from; in addition there before them regarding a positive price elasticity of demand. The atypical course of the demand curve then takes his output is that a higher price for the Giffen Good means that a household is more expensive goods can no longer afford it and so far have to ask even more the Giffen good as before.
The demand for Veblen any goods other hand, is of course, in any case, normal - the demand is the premise of income rises, just to. (Consider also that the violation of the law of demand in the Giffen case actually exists in the sense that it takes place not above for Veblen goods can deconstruct theoretical. )