For a Giffin good

Question

For a Giffin good

Quizplus · Accepted Answer

A Giffin good is a type of inferior good where the quantity demanded increases when the price increases. This is due to the income effect being greater than the substitution effect. As the price increases, the consumer's purchasing power decreases and they may switch to cheaper alternatives. However, for Giffin goods, the cheaper alternatives are of lower quality, so the consumer may choose to consume more of the good as it is seen as a necessity. Therefore, the income effect (decrease in purchasing power) outweighs the substitution effect (cheaper alternatives available) and leads to an increase in quantity demanded.

For a Giffin Good