Homework Writing
- Conspicuous Consumption
Conspicuous consumption refers to the spending of finances and obtaining luxury products and services to openly exhibit economic power; of the earnings or the amassed opulence of the buyer. A conspicuous buyer uses this public exhibition of discretionary economic influence as a way of acquiring or maintaining a particular social reputation. According to Veblen, the sociology associated with conspicuous consumption generated the terms invidious consumption and conspicuous compassion. Invidious consumption is the pretentious consumption of commodities to make other people envious. Next, conspicuous compassion refers to the intentional utilization of generous donations of funds to promote the donor’s social image; with an exhibition of higher socio-economic status.
- Does Conspicuous Consumption Exist?
Conspicuous consumption is used by many to publicly show their social status, mainly when the commodities and services involved are too costly for other people of an individual’s class. I agree with Veblen that conspicuous consumption exists. Veblen termed this form of consumption as resulting from the growing middle-class population within the 19th and 20th centuries. This population was considered to have a more significant portion of disposable earnings to use on commodities and services that were usually not viewed as necessary. Even today, certain people spend money on expensive goods and services just because they want to look wealthy to the public but not because they need them. This can be typified by the buying of commodities specially produced to serve as a symbol of opulence. For instance, whereas there are various types of high-class smartphones in the market from famous companies, speciality smartphones designed stringently as luxury products have also been manufactured.
- The Role of Price in Determining Marginal Utility
Conspicuous consumption involves items known as Veblen goods. Veblen goods are the forms of commodities whose demand increases proportionally with the rise in price. This is because conspicuous consumers believe that higher prices reflect more excellent status. Conspicuous consumption involves people buying more as price rises since they think more costly items are of better quality. Research shows that individual attain more fulfilment from acquiring expensive commodities. For this reason, the extra satisfaction achieved from buying each Veblen good leads to higher marginal utility. The gains associated with conspicuous consumption can be related to the concept, put forward by economists that consumers acquire ‘utility’ from consuming goods. For instance, owning a luxury car depicts that consumer can afford a vehicle that other people admire because it provides clear evidence of wealth.
- Does the existence of conspicuous consumption negate the chapter analysis about maximizing total utility? Why or why not?
Conspicuous consumption is stimulated by the aspiration for status in the society, the clear exhibition of social status, instead of the primary, practical utility of the commodities and services. Take, for example, three individuals in a bar and wish to spend the sum of money that signals their wealth to other people around. Each individual’s total utility is then obtained from the primary utility associated with the drinking as well as social status exhibited from the consumption. According to the chapter, total utility is maximized when a consumer acquires the highest value possible from spending the least amount of finances (Jenkins, 2016). However, conspicuous consumption is all about purchasing a product at the highest cost reasonable. The consumer is only concerned with appearing wealthy, no matter the value obtained from a specific item. Therefore, this negates the chapter’s analysis of the maximization of total utility.
References
https://www.youtube.com/watch?v=UwvUU8aIQ9w&authuser=0
Jinkins, D. (2016). Conspicuous consumption in the United States and China. Journal of Economic Behavior & Organization, 127, 115-132.