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Reading Expert 3(2020)
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Reading Expert 3(2020)
UNIT 06 - READING 2 The Veblen Effect
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UNIT 06 - READING 2 The Veblen Effect
The law of supply and demand is one of the most basic principles of economics. If supply is high or demand is low, the price of a product usually drops. If demand is high or supply is low, the price usually rises. A second basic principle is that people are more likely to buy a product when its price is low. However, there are some exceptions to this rule. One of them is the Veblen effect. First noted in 1899 by the sociologist Thorstein Veblen, this theory states that under certain conditions, consumers are actually attracted to items because they are more expensive. Consumers who act this way, according to Veblen, are usually rich people who want to show others just how wealthy they are. By purchasing and displaying expensive items, they seek to either raise or confirm their social status. The items involved with the Veblen effect are generally luxury goods, such as designer handbags, brand-name sports shoes, and expensive cars. These so-called "status goods" are generally not of higher quality than their more reasonably priced counterparts. What actually matters to the purchaser is the level of prestige associated with the product or its manufacturer. Understanding this, marketers sometimes use the Veblen effect in their ads. By including words like "prestigious," "impress," and "envy," they can attract certain consumers to their high-priced goods and services. These days, there are also people who want to keep up with their wealthier neighbors. They may not be able to comfortably afford luxury items, but they want others to think they can. Some people will spend an entire month's salary on a single high-prestige item, such as a designer bag. As a result, counterfeit products, made to look like expensive brand-name goods, have become popular. Ultimately, the Veblen effect is about belonging to an exclusive group. If the prices of these products were lowered and everyone could afford them, they would no longer hold the same appeal.
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1 The law of supply and demand is one of the most basic principles of economics. 2 If supply is high or demand is low, the price of a product usually drops. 3 If demand is high or supply is low, the price usually rises. 4 A second basic principle is that people are more likely to buy a product when its price is low. 5 However, there are some exceptions to this rule. 6 One of them is the Veblen effect. 7 First noted in 1899 by the sociologist Thorstein Veblen, this theory states that under certain conditions, consumers are actually attracted to items because they are more expensive. 8 Consumers who act this way, according to Veblen, are usually rich people who want to show others just how wealthy they are. 9 By purchasing and displaying expensive items, they seek to either raise or confirm their social status. 10 The items involved with the Veblen effect are generally luxury goods, such as designer handbags, brand-name sports shoes, and expensive cars. 11 These so-called "status goods" are generally not of higher quality than their more reasonably priced counterparts. 12 What actually matters to the purchaser is the level of prestige associated with the product or its manufacturer. 13 Understanding this, marketers sometimes use the Veblen effect in their ads. 14 By including words like "prestigious," "impress," and "envy," they can attract certain consumers to their high-priced goods and services. 15 These days, there are also people who want to keep up with their wealthier neighbors. 16 They may not be able to comfortably afford luxury items, but they want others to think they can. 17 Some people will spend an entire month's salary on a single high-prestige item, such as a designer bag. 18 As a result, counterfeit products, made to look like expensive brand-name goods, have become popular. 19 Ultimately, the Veblen effect is about belonging to an exclusive group. 20 If the prices of these products were lowered and everyone could afford them, they would no longer hold the same appeal.