How some products violate the law of demand
A story, quote and lesson about consumer theory
When prices rise, demand falls. Right?
Not always. Imagine a world where price tags climb, yet consumers line up for more. This counterintuitive phenomenon plays out with Giffen and Veblen goods, where price hikes defy basic economic laws and increase demand instead. Why? The reasons are as fascinating as they are distinct.
In the late 1800s, Sir Robert Giffen observed a strange pattern in bread consumption among low-income households. As bread prices rose, demand didn’t dip—instead, it surged. With a tighter budget, families cut back on pricier goods, forcing them to buy more bread to survive. This “Giffen good” behavior defied the standard law of demand, revealing a paradox: under certain pressures, a higher price can make a product even more necessary.
Enter Veblen goods, the luxury counterparts that flaunt the “price-demand” rule for entirely different reasons. Coined by economist Thorstein Veblen in the 1890s, the concept of Veblen goods describes luxury items like designer watches, art, or high-end fashion. For these products, high prices serve as symbols of status; the higher the price, the greater the allure. Here, people are drawn to the exclusivity of luxury, seeing it as a reflection of their own value.
Both cases showcase a core truth: sometimes raising the stakes can make something more desirable. The same principle might apply in our own lives: when we become more selective with our time, energy, or focus, we increase our own “value.” Instead of spreading thin, we can create a deeper impact, much like Giffen goods meeting critical needs or Veblen goods establishing prestige.
“Your value doesn’t decrease based on someone’s inability to see your worth.”
Just as demand for Giffen and Veblen goods can rise with price, prioritizing what matters most in your own life can amplify the value you create. The magic often lies in quality over quantity. Becoming more discerning can make the difference between a stretched-thin routine and a purposeful one, and the results can be transformative.
So now I ask you:
What parts of your life might benefit from a “price increase” by focusing your energy and being selective with your commitments?