The Giffen Good  is although a rare case yet still has valid possibilities. By definition:

Giffen Good is a special case where the Demand Curve Slopes Upward because the Income effect is greater than the Substitution Effect

In this case, the Income effect is Negative and outweighs the Substitution effect. Which is why the Demand Curve Slopes Upwards. So a Rise in Prices sometimes rises the Quantity of the Good aswell.

When is the Income Effect Negative ? Well, from our Previous Topic of Income and Substitution Effect  it was already described that an Income Effect is Positive incase of a Normal Good and Negative Incase of an Inferior Good. So when a Good is Inferior, and the Income effect is large enough to Dominate the Substitution Effect which will lead to Upward sloping Demand Curve than this is considered as a Giffen good case.

Lets get started

Lets get started

Join us to receive instructor manuals, notes, lectures , e-book and tutorials videos, completely and a complete online course of Economics totally FREE

You have Successfully Subscribed!

Shares
Share This