In microeconomics and consumer theory, a Giffen good is a product that people buy more of as its price rises, and less of as its price falls, which violates the ordinary law of demand. For most goods, a price increase leads to lower consumption because of the substitution effect, but a Giffen good is such a strongly inferior good that a contrary income effect outweighs the substitution effect, so the net effect of a price rise is to increase demand for it, an outcome known as the Giffen paradox. Giffen goods are distinguished from Veblen goods, whose demand rises with price because a higher price signals status or quality; a Giffen good instead behaves this way because poorer consumers, unable to afford better alternatives, are forced to buy more of a cheap staple good once its price rises and their real budget shrinks. This description is adapted from Wikipedia contributors under CC BY-SA 4.0; changes were made. https://creativecommons.org/licenses/by-sa/4.0/
Facts
FieldMicroeconomics and consumer theory 1 Proposed ByNamed after Scottish economist Robert Giffen; the idea was attributed to him by Alfred Marshall 1 Origin YearYear Marshall's Principles of Economics was first published, the book in which Marshall attributed the paradox to Giffen; Giffen's own underlying observations of Victorian-era purchasing habits carry no year in the source. SignificanceA textbook counterexample to the law of demand, arising when a good is so strongly inferior that the income effect of a price rise outweighs the substitution effect, known as the Giffen paradox. 1 Classification
Concept Form Connections
Associated With
Veblen Good, Concepts Both are standard textbook exceptions to the law of demand, where quantity demanded rises as price rises, though for different reasons: an income effect for a Giffen good, status signaling for a Veblen good.
Source Wikipedia
Additional Source Giffen good (Wikipedia)
Attributed To
Source History of Economic Thought Website: Robert Giffen profile
Sources
1. Giffen good (Wikipedia)
Lead section
In microeconomics and consumer theory, a Giffen good is a product that people consume more of as the price rises and vice versa, violating the law of demand.
Background section
Giffen goods are named after Scottish economist Sir Robert Giffen, to whom Alfred Marshall attributed this idea in his book Principles of Economics, first published in 1890.
Lead section, second paragraph
This phenomenon is known as the Giffen paradox.
lead paragraph, sentence beginning: In microeconomics and consumer theory, a Giffen good is a pr
In microeconomics and consumer theory, a Giffen good is a product that people consume more of as the price rises and vice versa, violating the law of demand.
- Associated With: Veblen Good
In Group: Demand, Supply and Cost Concepts, Lead
In microeconomics and consumer theory, a Giffen good is a product that people consume more of as the price rises and vice versa, violating the law of demand.
View the SourceHistory of Economic Thought Website: Robert Giffen profile
History of Economic Thought WebsiteAttributed To: Robert Giffen, Profile pageQuote, Attributed To: Robert Giffen, Profile page
Giffen is credited by Marshall for suggesting the possibility that, in the case of some inferior goods, the income effects are so strong that the law of demand may be violated.
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