difference between giffen goods and inferior goods?
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All Giffen goods are inferior goods. But not all inferior goods are Giffen goods.
For inferior goods, the negative substitution effect will more than offset the positive income effect, so that total price effect will be negative. For Giffen goods, the positive income is positive and very strong that the law of demand does not hold. Price elasticity of Giffen good is positive.
Inferior Goods: Cheap goods
Giffen Goods: Rice, wheat, noodles are Giffen goods in China
For inferior goods, the negative substitution effect will more than offset the positive income effect, so that total price effect will be negative. For Giffen goods, the positive income is positive and very strong that the law of demand does not hold. Price elasticity of Giffen good is positive.
Inferior Goods: Cheap goods
Giffen Goods: Rice, wheat, noodles are Giffen goods in China
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