What is giffen goods?

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well in economics and consumption theory it refers to a product that people consume more of as the prices rice and vice versa -violating the basic law of demand in microeconomics so in short a good where higher price cause an increase in demand(reversing the usual law of demand). The increase in demand is due to income effect of the higher price outweighting the substitution effect.

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Giffen  goods are firstly an exception to law of demand. They show a negative income effect . Change in income do not show and change in their consumption. For eg let us consider salt. Increase or decrease  in our income does not effect our consumption for salt cause it takes a very small amount of our income .

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A special type of inferior foods in which a consumer spends most of his income  and demand for which falls with fall in price and vice versa

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inferiar goods

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Giffen goods: are a special category of inferior goods, where the income effect strictly dominates the substitution effect. That is, the overall demand for the good will always fall with a decrease in it’s price. Hence we can say all giffen goods are inferior, but the converse is not true. Now example of a giffen good is difficult to provide. Theoretically speaking, we can construct a good which has a higher degree of inferiority (say a even lower quality grocery item). A real life exapmple of giffen good can be found :A more recent – and perhaps better – example of a Giffen good is offered by a 2007 study by Harvard economists Robert Jensen and Nolan Miller. Jensen and Miller conducted a field experiment in two provinces in China – Hunan, where rice is a dietary staple, and Gansu, where wheat is the staple. Randomly selected households in both provinces were given vouchers that subsidized their purchase of the staple food.The economists found strong evidence of Giffen behavior exhibited by Hunan households with respect to rice. Lowering the price of rice through the subsidy caused reduced demand by households for rice, while increasing the price (by removing the subsidy) had the opposite effect.

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These goods are quite rare... they dominate there market because they do not have any substitute..

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inferior goods

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when price of giffen goods increases demand for giffen goods will also increases because now the consumer shift the resources from superior goods to giffen goods or inferior goods and vice versa

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Giffen goods are those goods whose demand increase with increase in price.It was first observed by sir Robert Giffen and is known as Giffen paradox.

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Inferior goods that means when income decrease its demand increase and when income rise its demand falls. it is put forward by Robert Giffen.that's why inferior goods are named as Giffen good

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inferior good or cheap quality of good is called giffen goods

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giffen goods are those goods which have positive price effect

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infirior good

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Those type of goods in which considerable portion of consumer income is expended and law of demand not applicable,

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They are an exception to the law. i.e when the price of X good rises the demand also tends to rise.

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This is cheep & low quality goods .

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Giffen goods are those type of inferior goods whose demand increases due to increase in price.

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giffen goods are highly inferior goods in which cross price effect is positive

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inferior godds

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below the inferior .Law of demand does not apply in these goods

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giffen goods are very low quality goods.

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inferior goods

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Inferior goods

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low quality goods

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Giffen goods are those goods whose demand increases with increase in price and decreases with decrease in price whereas inferior goods are those goods whose demand increases with the increase in income and vice versa

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Giffen Goods: An Explanation

Giffen goods are a rare phenomenon in the field of economics that contradict the basic law of demand. Unlike most goods, which follow the law of demand stating that as the price of a good increases, the quantity demanded decreases, Giffen goods exhibit an opposite relationship. In the case of Giffen goods, an increase in price leads to an increase in demand.

Understanding the Giffen Paradox

The concept of Giffen goods was introduced by Sir Robert Giffen, a Scottish economist, in the late 19th century. Giffen observed a peculiar behavior among low-income individuals in Ireland, where an increase in the price of bread led to an increase in its demand. This counterintuitive phenomenon became known as the Giffen paradox.

Factors Influencing the Demand for Giffen Goods

The demand for Giffen goods is influenced by several factors, including:

1. Income Effect: As the price of a Giffen good increases, it erodes the purchasing power of consumers, especially those with limited income. This forces them to allocate a larger portion of their budget to the Giffen good, leaving less money for other goods. Consequently, they may increase their demand for the Giffen good while reducing their consumption of other goods.

2. Substitution Effect: In the case of Giffen goods, there is often a lack of close substitutes available in the market. As a result, consumers are unable to easily switch to alternative goods when the price of the Giffen good increases. This further strengthens the demand for the Giffen good.

Examples of Giffen Goods

Although Giffen goods are rare and difficult to find in real-world scenarios, a few examples have been proposed:

1. Basic Food Staples: In some developing countries, staple food items like rice or potatoes may exhibit Giffen behavior due to the limited availability of substitutes and the high proportion of income spent on these goods.

2. Inferior Goods: Some inferior goods, such as cheap low-quality products, may display Giffen-like characteristics. As their prices increase, consumers may perceive them as higher quality goods and increase their demand.

Conclusion

Giffen goods represent a unique exception to the law of demand, where an increase in price leads to an increase in demand. While they are rare and challenging to identify, understanding the factors that influence the demand for Giffen goods can provide valuable insights into consumer behavior and market dynamics.

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