![]() ![]() The following illustrates the household’s consumption of rice and wheat:Ĭonsider a scenario where the price of rice increases to $6. Rice is considered an inferior good, is cheaper than its substitutes, and represents a large portion of the household’s spending.The household consumes two goods to meet their grain consumption demand: rice and wheat. The concept of a Giffen good sounds counterintuitive – why would an individual consume more of a good if its price increases?Ĭonsider a poor household with a maximum monthly expenditure on food at $400 and a minimum consumption of grains at 50 kg. The term Giffen good was developed by the economist after he noticed, in the poor Victorian era, that the rise in the price of a basic food increased the demand for that particular food. ![]() The term Giffen good was named after Scottish economist Sir Robert Giffen. It is important to note that all Giffen goods are inferior goods, but not all inferior goods are Giffen goods. ![]() Therefore, a Giffen good shows an upward-sloping demand curve and violates the fundamental law of demand. A Giffen good, a concept commonly used in economics, refers to a good that people consume more as the price rises. ![]()
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