What are Veblen goods known for?

Veblen goods are known for their unique demand characteristics, particularly the idea that they become more desirable as their price increases. This phenomenon arises from the perception that higher prices signal higher status or prestige associated with the good, which appeals to consumers seeking to display wealth or social standing. As a result, an increase in price can lead to an increase in demand, which contrasts directly with standard economic theory where higher prices typically reduce demand.

This concept is particularly relevant for luxury items, such as designer apparel or high-end cars, where the exclusivity and social signaling associated with higher prices drive consumer interest. As consumers perceive these goods as symbols of status, their desire to own them intensifies with their price elevation, thus motivating them to purchase despite the higher cost.

The other options do not accurately reflect the characteristics of Veblen goods. Essential goods typically have inelastic demand and do not fit the Veblen concept. Inferior goods are associated with decreased demand as incomes rise, and the idea of perfectly inelastic supply does not apply to Veblen goods, which can still be influenced by changes in consumer perceptions and societal trends.