The goods that people tend to consume more of when their prices rise, due to special preferences or status effects, are known as what kind of goods?

Introduction / Context:
In standard microeconomic theory, the law of demand states that as the price of a good rises, the quantity demanded falls, other things being equal. However, certain rare types of goods seem to violate this general rule, and understanding them is a popular exam topic. This question asks about the goods for which people consume more when prices rise. Two important concepts here are Giffen goods and Veblen goods. The question expects familiarity with the traditional terminology used in many textbooks and competitive exams.

Given Data / Assumptions:
- The focus is on goods for which quantity demanded increases as their price rises.
- Options include essential goods, capital goods, Veblen goods and Giffen goods.
- We assume the context is standard exam oriented microeconomics where Giffen goods are emphasised as a classic exception to the law of demand.

Concept / Approach:
Giffen goods are inferior goods for which the negative income effect of a price rise is so strong that it outweighs the substitution effect, leading to higher quantity demanded as price increases. They are often described in the context of staple foods for very poor households. Veblen goods, by contrast, are luxury items where higher prices may increase demand because they confer status, but many introductory courses and exams still emphasise Giffen goods as the textbook exception to the law of demand. Among the options, the standard name widely used in exam questions for goods bought in larger quantities when prices rise is Giffen goods.

Step-by-Step Solution:
Step 1: Recall that for most normal and inferior goods, a price rise leads to lower quantity demanded due to the law of demand. Step 2: Identify the special case where a price rise leads to an increase in quantity demanded. In older exam traditions, this is associated with Giffen goods. Step 3: Giffen goods are described as strongly inferior goods where the income effect of a price change dominates, such that when price rises, poor consumers are forced to buy even more of the cheaper staple and cut down on better quality alternatives. Step 4: Essential goods and capital goods do not generally violate the law of demand in this specific way, and are not defined by this behaviour. Step 5: Veblen goods are luxury or status goods where a higher price may signal higher status, but many exam questions about the basic exception to the law of demand focus on Giffen goods as the standard answer. Step 6: Therefore, within the conventional exam framework, the correct answer is Giffen goods.

Verification / Alternative check:
Consider a very poor household that consumes mainly a cheap staple, such as a low quality grain, and a small amount of more expensive food. When the price of the staple rises, real income falls sharply. The household cannot afford as much of the better food, so it reduces that consumption and shifts even more towards the staple, even though its price is higher. This leads to an increase in demand for the staple as price rises, which is the classic Giffen behaviour. This scenario is exactly what textbooks use to define Giffen goods, confirming that the term applies to such goods.

Why Other Options Are Wrong:
Essential goods are wrong as the answer because although people may still buy them despite price rises, they normally follow a downward sloping demand curve in formal theory.
Capital goods are wrong because these are machines and equipment used in production; their demand is derived from the demand for final goods and not defined by increasing consumption when price rises.
Veblen goods describe luxury status goods for which a higher price can increase desirability, but in many basic microeconomics and Indian economy multiple choice questions, the classic exception to the law of demand is labelled as Giffen goods, especially when no explicit mention of prestige or status is made.

Common Pitfalls:
A modern conceptual pitfall is to confuse Veblen goods and Giffen goods because both can show an upward sloping demand curve. The difference is that Giffen goods are inferior necessities where income effects dominate, while Veblen goods are luxury items where higher price itself creates desirability due to prestige. Since exam questions often use the simpler older terminology, students should be careful to choose Giffen goods when the context is poor consumers and staples, or when the question simply states that people buy more as price rises without mentioning status. Reading textbooks and previous years' papers helps to see how exam setters use the term.

Final Answer:
The goods that people are traditionally said to consume more of when their prices rise are called Giffen goods.