Luxury Goods That Are In High Demand As A Result Of High Prices Are Referred To As?
Answer: Veblen Goods
Some consumer goods cost more because they are made of pricier materials or require more labor to craft. A flashlight made out of metal machined to a high tolerance costs more because of the materials and labor, for instance, than a flashlight made of cheap injection molded plastic. For the most part, however, short of covering something in diamonds just for the sake of covering it in diamonds, there is a practical limit to how much the materials and labor can truly influence the cost of something. Beyond that, the cost of the product often has more to do with good marketing and what people are willing to pay for it, rather than a strict reflection of the cost of production.
On the extreme end of this scale, you find what are called “Veblen goods”. These items, named after the American economist Thorstein Veblen who identified the trend in his 1899 treaty book The Theory of the Leisure Class, are consumer products that are more sought after the more expensive they become. The premise is that the more expensive something is, the more valuable, in the mind of the consumer at least, it must be and by extension the more status it imparts when purchased. Veblen also coined the term “conspicuous consumption” in the same book to describe the action of consuming luxury goods to display social status and economic power.
High profile examples of this phenomenon are products like Rolls-Royce cars and Cristal champagne. While not shoddy products by any stretch of the imagination, a significant amount of the value in the purchase price is the cachet of the name and the association of wealth and luxury that comes with it.
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