Conspicuous consumption
Topic: Consumer Behaviour, Demand and Elasticity · NCERT: Beyond NCERT
Meaning
Conspicuous consumption means spending on costly goods mainly to show off wealth and social status, not because the goods are especially useful. Thorstein Veblen named it in The Theory of the Leisure Class (1899). It explains Veblen goods, whose demand can rise when their price rises, because a high price signals prestige. It is a case where the law of demand does not hold.
Example
A wealthy family buys a luxury car or designer jewellery for a wedding mainly because the high price tag tells everyone about their status. If the brand cut its price, some of these buyers might lose interest.
Don't confuse with
- Giffen good: demand also rises with price, but the cause is a strong negative income effect among the very poor buying an inferior staple. It has nothing to do with prestige.
- Bandwagon effect: here people buy because many others are buying. Conspicuous consumption is about standing out through a high price.
Related concepts
- Law of demand
- Substitution effect
- Income effect
- Normal good
- Inferior good
- Giffen good
- Veblen good
- Bandwagon effect
- Snob effect
- Demonstration effect