the difference between giffen goods and inferior goods
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Giffen good is a special type of inferior good whose demand increases as the price of the good increases (effective consumer income decreases due to price increase). An example could be rice which is a staple food of a region and majority of the food consumption is rice that cannot be substituted.
Giffen good
A good for which demand increases as the price increases, and falls when the price decreases. A Giffen good has an upward-sloping demand curve, which is contrary to the fundamental law of demand which states that quantity demanded for a product falls as the price increases, resulting in a downward slope for the demand curve. A Giffen good is typically an inferior product that does not have easily available substitutes, as a result of which the income effect dominates the substitution effect. Giffen goods are quite rare, to the extent that there is some debate about their actual existence. The term is named after the economist Robert Giffen.
inferior good
is a good that decreases in demand when consumer income rises (or rises in demand when consumer income decreases),[1] unlikenormal goods, for which the opposite is observed.[2] Normal goods are those for which consumers' demand increases when their income increases. [3] This would be the opposite of a superior good, one that is often associated with wealth and the wealthy, whereas an inferior good is often associated with lower socio-economic groups.
Inferiority, in this sense, is an observable fact relating to affordability rather than a statement about the quality of the good. As a rule, these goods are affordable and adequately fulfill their purpose, but as more costly substitutes that offer more pleasure (or at least variety) become available, the use of the inferior goods diminishes.
Giffen good
A good for which demand increases as the price increases, and falls when the price decreases. A Giffen good has an upward-sloping demand curve, which is contrary to the fundamental law of demand which states that quantity demanded for a product falls as the price increases, resulting in a downward slope for the demand curve. A Giffen good is typically an inferior product that does not have easily available substitutes, as a result of which the income effect dominates the substitution effect. Giffen goods are quite rare, to the extent that there is some debate about their actual existence. The term is named after the economist Robert Giffen.
inferior good
is a good that decreases in demand when consumer income rises (or rises in demand when consumer income decreases),[1] unlikenormal goods, for which the opposite is observed.[2] Normal goods are those for which consumers' demand increases when their income increases. [3] This would be the opposite of a superior good, one that is often associated with wealth and the wealthy, whereas an inferior good is often associated with lower socio-economic groups.
Inferiority, in this sense, is an observable fact relating to affordability rather than a statement about the quality of the good. As a rule, these goods are affordable and adequately fulfill their purpose, but as more costly substitutes that offer more pleasure (or at least variety) become available, the use of the inferior goods diminishes.
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