Goods whose quantity demanded rises in proportion to higher prices, often due to status or prestige motives, are known as what type of goods?

Introduction / Context:
Most economic theory assumes that when price increases, the quantity demanded falls, giving a downward sloping demand curve. However, certain special types of goods show the opposite pattern for particular reasons. This question focuses on goods whose higher price itself makes them more desirable because price signals status, luxury or exclusivity.

Given Data / Assumptions:

• We are dealing with goods for which demand moves in the same direction as price.
• The reason is not basic survival but social status and prestige.
• These goods are typically luxury items such as designer clothing, high end watches or premium cars.
• Consumers may view a higher price as a sign of higher quality or higher social standing.

Concept / Approach:
Veblen goods are named after the economist Thorstein Veblen, who described conspicuous consumption. For such goods, a higher price can increase their desirability because buyers want to display wealth or status. Therefore, for a certain range, demand can rise when price rises, giving a positively sloped demand curve segment. This is different from inferior goods, where demand may rise when income falls, and from Giffen goods, where the income effect dominates for very poor consumers of staple goods. In the question, the key phrase is that demand is proportional to price, which points to Veblen goods driven by prestige.

Step-by-Step Solution:
1. Identify that the puzzle is about demand moving in the same direction as price, not in the opposite direction. 2. Recall that Veblen goods are luxury items whose high price is part of their appeal. 3. Inferior goods are defined by their relationship with income, not price proportionality in this sense. 4. Normal goods have a standard downward sloping demand curve as price rises. 5. Therefore, goods whose demand rises with higher prices due to prestige effects are best described as Veblen goods.

Verification / Alternative check:
Think of a premium designer handbag that suddenly doubles in price. For some consumers, the very fact that it is more expensive makes it more attractive, because fewer people can afford it and it signals status. This is the classic Veblen effect. By contrast, for a staple food item, a price increase would typically reduce demand for most consumers, except in special Giffen cases related to very low income households.

Why Other Options Are Wrong:
Option A: Inferior goods are those for which demand decreases when income rises, for example cheap coarse grains, but their demand does not rise simply because price increases.
Option C: Normal goods have positively related demand to income and negatively related demand to price, so the usual downward sloping demand curve applies.
Option D: Exclusive goods might be limited in quantity, but exclusivity alone does not capture the idea that higher price itself stimulates more demand due to status.
Option E: Giffen goods show an upward sloping demand curve because of a strong income effect for poor consumers, but they are usually basic necessities, not luxury status goods.

Common Pitfalls:
Students often confuse Giffen goods and Veblen goods because both can show unusual demand behaviour. Remember that Veblen goods are about prestige and conspicuous consumption, while Giffen goods are about subsistence and binding budget constraints. Another pitfall is to think that all luxury goods are Veblen goods, but in reality this behaviour usually applies only within a certain price range and for specific consumer groups.

Final Answer:
Veblen goods