Giffen Good

Giffen goods is the term which is used in the economics, giffen goods are those goods which are a paradox because for all other goods as the price of good rise the demand for that good falls and when the price of good falls the demand for that good rises but for giffen goods as the price of good rises the demand for these good rises instead of falling and when the price of good falls the demand also falls making it a paradox.

In real life giffen goods are hard to find, one example of giffen good can be price of stocks. During bull markets irrational investors tend to buy more as the price of stock rises and the same investor will sell when the price of stock decline during bear market. Another example of giffen would be when a person is poor he or she will eat those foods which have high calories and when the price of that food rise the poor will demand more of that food and reduce expenditure on all other food items and when the price of that food declines the poor will demand less of that food and divert the expenditure towards other food items because than he or she can get the calories from other food sources.

2 comments… add one

  • Vinayak

    How it is different than Veblen Goods ?

    • Vinish Parikh

      I have already discussed about veblen goods. You can read it here

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