Questions tagged [giffen-goods]

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Whether a good is a Giffen good should be based on circumstance?

The textbook example of a Giffen good is the potato during the Irish Potato Famine. It is characterised by a positive income effect that is larger than the negative substitution effect when the price ...
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1answer
60 views

Is the consumer surplus on a Giffen/Veblen good negative?

When drawing the demand and supply curves on a quantity/product space for an upwards sloping demand, assuming the two curves intersect, I noticed that the traditional consumer surplus region lies ...
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1answer
299 views

Giffen Goods & Complementary Goods

Consider that good X and good Y are complements and good X is a Giffen good. If I increase the price of good X, what affect does this have on the price and quantity demanded of good Y? My reasoning ...
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2answers
4k views

Difference between Giffen and inferior goods. Why aren't all inferior goods Giffen goods?

What is the difference between an inferior good and a Giffen good? Are the two following definitions for an inferior good equivalent? Def 1: An inferior good is a good for which the demand decreases ...
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1answer
529 views

Verification of understanding of the substitution and income effect of normal, inferior and Giffen goods?

My understanding is as follows: Normal Goods: Income and Substitution effects are both positive. Inferior Goods: Income effect negative, substitution effect positive. Substitution effect outweighs ...
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1answer
169 views

If the price of a good rises, will the demand always fall?

If the price of a good or service rises, the demand for that product will always fall? Apart from Giffen goods and luxury are there any other cases and what economic analysis supports or argues with ...
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1answer
184 views

Identify whether a good is giffen good or not and under what condition

Given the following partial information about a consumer's purchases.He consumes only two goods. In year 1, $p_1^1=p_2^1=100,x_1^1=x_2^1=100$ In year 2, $p_1^2=100,p_2^2=80,x_1^2=120$ Over what ...
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1answer
290 views

Do standard definitions of substitute goods and complementary goods assume the Law of Demand?

It seems to me that they do. Suppose $x$ is a Giffen good (that is, it violates the law of demand). Then when $p_x$ increases, the quantity of $x$ demanded increases. Suppose also that this increase ...
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0answers
222 views

How Would a Firm Which Produces a Giffen Good Maximize Profits?

I am curious as to how a firm which produces a giffen good would maximize profits? Having an upward sloping demand curve seems to imply that we cannot guarantee that there exists a quantity where ...