In economies with high inflation, why demand remains strong, or even shows an upward trend, while prices of some products continue to rise, is a frequently asked question, but one that is difficult to answer with one-dimensional explanations. Classical microeconomics states that demand decreases when prices rise. However, for some goods, price is not just a cost; it is also a message. A high price suggests that access to that good is limited. This limitation is not a deterrent for some consumers, but rather an attraction. Because what is expensive is inaccessible to everyone; and what is inaccessible to everyone is differentiating. Thus, price ceases to be a factor that reduces demand and becomes a signal indicating differentiation among consumers.
Such behavior is discussed in the microeconomics literature within the framework of the concept of conspicuous behavior. The consumer may demand a product not only because of the direct benefit it provides, but also because of the social meaning and status it represents. At this point, in addition to the question of "what is the product used for?", the question of "what does the product represent?" becomes part of the consumption decision. Thorstein Veblen's work provides a significant reference in the literature for explaining this behavioral pattern, showing that price increases for some goods do not automatically reduce demand. For such goods, being expensive is not a disadvantage; it is, in fact, a source of demand.
Inflationary environments make this behavior even more visible. In periods when the purchasing power of money rapidly decreases and economic uncertainty increases, individuals' spending decisions may change. Especially in conditions where the real return on saving is weak, consumption decisions may reflect not only present utility but also the individual's desire to maintain their current economic and social position. In this context, some spending preferences can be interpreted as behavioral adaptations developed in the face of uncertainty, rather than a rigid utility maximization calculation.
This phenomenon, which arises from the convergence of these individual motivations at the market level, is referred to in the literature as conspicuous consumption. The fact that price increases for certain groups of goods do not reduce demand, and that demand remains strong even within limited price ranges, is considered among the exceptions to classical demand theory. Such situations are discussed in the literature within the scope of the Veblen effect, indicating that price can create a positive signaling effect on demand under certain conditions. These exceptions do not invalidate microeconomic theory, but rather highlight the need to consider consumer preferences along with their social dimensions. As Varian emphasizes, such exceptions do not demonstrate the weakness of the theory, but rather its adaptability to real life and the importance of capturing consumer behavior.
In conclusion, focusing solely on cost, exchange rate, or monetary policy variables is insufficient to explain why prices continue to rise under inflationary conditions. Consumer perceptions, expectations, and social comparison mechanisms must also be included in the analysis. Microeconomics reminds us that consumption decisions are not always related solely to economic utility; in some cases, they may also be related to how an individual positions themselves socially.
