reduction in real income leads households to purchase more of that good.
Second, the good must take a large proportion of total household
expenditure and therefore have a large income effect. Bread was indeed a
dietary staple of the British working classes during the nineteenth
century. A rise in the price of bread would therefore cause a large
reduction in people’s real income. This could lead people to eat more
bread (and less meat) in order to consume enough calories to stay alive.
Though possible, such cases are all but unknown today for in all but the
poorest societies, because typical households do not spend large
proportions of their incomes on any single inferior good.
Conspicuous Consumption Goods
A second case of positively sloped demand curves relates to what are
called conspicuous consumption goods. Thorstein Veblen (1857–1929), in
The Theory of the Leisure Class, noted that some products were consumed
not for their intrinsic qualities but because they had “snob appeal.” He
suggested that the more expensive such a product became, the greater
might be its ability to confer status on its purchaser.
Consumers might value very expensive handbags, for example, precisely
because everyone knows they are expensive. Thus, a fall in price might
lead them to stop buying these handbags and to switch to a more
satisfactory object of conspicuous consumption. They may behave in the
same way with respect to luxury cars, buying them because they are
expensive. Does this sort of behaviour violate our basic theory of utility
maximization?