When a commodity acts as a Veblen good ?
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Answer: C. Demand is directly related to price
Explanation
A Veblen good represents a unique luxury item desired for its high status and prestige. Demand for Veblen goods increases as their market price rises due to conspicuous consumption. The direct relationship between price and demand violates standard microeconomic demand laws. Conspicuous consumption involves purchasing luxury goods to publicly display wealth and social standing. Veblen goods contrast with normal goods because higher prices enhance their perceived exclusivity. Named after economist Thorstein Veblen, these anomalies challenge traditional utility maximization models.
Luxury designer handbags, high-end watches, and exotic sports cars often function as Veblen goods. Marketers intentionally maintain inflated prices to preserve the prestige and desirability of luxury brands. Standard consumer theory must be modified to account for status-seeking purchasing behaviors. Inverse income relationships characterize inferior commodities rather than prestige luxury Veblen goods. Inverse price relationships describe standard consumer demand curves rather than Veblen anomalies. Substitute price relationships determine cross-price elasticity rather than direct price-demand behavior.
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