A consumer's bundle includes good X and good Y. If good X is a Giffen good and the price of good X decreases, the consumer will buy ____ of good X and ____ of good Y.

Question

Quizplus · Accepted Answer

Giffen goods are an exception to the typical law of demand, where a decrease in price leads to a decrease in quantity demanded because the income effect outweighs the substitution effect. As consumers spend less on the Giffen good (good X), they can afford more of good Y, hence they buy less of good X and more of good Y.

A Consumer's Bundle Includes Good X and Good Y