Question

Pick one commodity/brand sold in the market that you think is a Veblen good and explain why it is a Veblen good. (Answer in 4-5 sentences.)

Answer 1

Diamond is a Veblen good because it is a high priced luxury item and it does not follow the law of demand.

Explanation- Veblen goods are those goods whose demand increases when its price increases and vice versa, like- supercars, luxury jewelry (diamond) and watches, etc. We can also say that Veblen goods do not follow the law of demand. According to the law of demand, an increase in the price of a commodity leads to a decrease in the demand for the given commodity keeping other factors constant and vice versa.