Giffen Good - Explained
What is a Giffen Good?
If you still have questions or prefer to get help directly from an agent, please submit a request.
We’ll get back to you as soon as possible.
- Marketing, Advertising, Sales & PR
- Accounting, Taxation, and Reporting
- Professionalism & Career Development
Law, Transactions, & Risk Management
Government, Legal System, Administrative Law, & Constitutional Law Legal Disputes - Civil & Criminal Law Agency Law HR, Employment, Labor, & Discrimination Business Entities, Corporate Governance & Ownership Business Transactions, Antitrust, & Securities Law Real Estate, Personal, & Intellectual Property Commercial Law: Contract, Payments, Security Interests, & Bankruptcy Consumer Protection Insurance & Risk Management Immigration Law Environmental Protection Law Inheritance, Estates, and Trusts
- Business Management & Operations
- Economics, Finance, & Analytics
What is a Giffen Good?
A Giffen good is any commodity which has an upward demand slope. That is, a Giffen good is any product which commands a higher demand when the price is increased, and commands a lower demand when the cost is reduced.
This is quite rare in economics, as people tend to buy more of a product when the price is cheaper than when it is higher. However, for a Giffen good, the reverse is case. In most cases, Giffen goods are Inferior Goods without readily available substitutes.
The term Giffen good is gotten from Sir Robert Giffen, a Scottish economist, journalist, and statistician who discovered that there are some products that people are willing to buy more when their prices increase.
Although there were different historical discussions about the existence of Giffen goods, modern day examples are quite rare, and this has prompted a lot of debates by theorists on the existence of such products.
Back to: ECONOMIC ANALYSIS & MONETARY POLICY
How Giffen Goods Were Discovered?
Alfred Marshall's Principle of Economics shows an example of Sir Robert Giffens work using examples from bread and meat. He claimed that bread would increase in price if the people have no money to buy meat. However, George J. Stigler refuted this claim in 1947 in his article titled Notes on the History of the Giffen Paradox.
The most recent and famous study on the existence and possibility of Giffen goods was offered by a 2007 study by two Harvard economists: Robert Jensen and Nolan Miller. Both parties conducted a study in China, using rice and wheat which were both dietary staples in the Hunan province and the Gansu province respectively. Different households in these areas were provided with vouchers which subsided the costs of their dietary staples. Results from the study showed that people in the Hunan province bought lesser rice when the price was made lower than when it was increased. The vouchers which helped to subsidizes the price of rice in the Hunan province led to lower demands from households. However, results from the Gansu province was different as lower prices didn't necessarily lead to lower demand as is supposed in basic and rational economics.
- Total Utility (Economics)
- Efficiency Principle
- Indifference Curve
- Time Preference Theory of Interest
- Diminishing Marginal Utility
- Sunk Costs
- Production Possibilities Frontier
- Law of Diminishing Returns
- Economic Efficiency
- Efficiency Theory
- Productive Efficiency
- Capacity Utilization Rate
- Pareto Efficient
- Comparative Advantage
- Criticisms of the Economic Approach
- Behavioral Economics
- Normative Economics
- Positive Economics
- Invisible Hand
- Sunk cost