Giffen goods, inferior goods and the income-effect logic behind them are covered with full diagrams in the Economics Made Simple Complete Bundle — textbook, practice questions with mark schemes, flashcards and 100 case studies.
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.
