Question

Which of the following is / are true regarding giffen and veblen goods?
1. They fail to follow the demand curve
2. The demand for veblen goods increase with increase in prices

Select the correct answer from the options given below

• A. 1 only
• B. 2 only
• C. Both 1 and 2
• D. None of the above

Answer 1

The correct option is C Both 1 and 2

A Veblen good is a good for which demand increases as the price increases, because of its exclusive nature and appeal as a status symbol. Example. I phone (which acts as a status symbol).
A Giffen good is a low income, non-luxury product for which demand increases as the price increases and vice versa. Demand for Giffen goods is heavily influenced by a lack of close substitutes and income pressures.
Both Giffen and Veblen goods have an upward-sloping demand curve which is contrary to the fundamental laws of demand which are based on a downward sloping demand curve