Question

What are Giffen goods? Why?

Answer 1

A Giffen good, in economic theory, is a good that is in greater demand as its price increases. For example, if the price of an essential food staple, such as rice, rises it may mean that consumers have less money to buy more expensive foods, so they will actually be forced to buy more rice. Giffen goods are named after Sir Robert Giffen who wrote that he observed this purchasing behaviour in the Victorian poor. Giffen goods differ from Veblen goods which also experience rising demandat the same time as rising prices but in this case the rising price fuels their demand. Veblen goods are luxury items while Giffen goods are staple items.


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