A Giffen good is a low income, non-luxurious product that does not obey the standard economic and consumer demand theory. Demand for Giffen goods increases when the price increases and decreases when the price decreases . In economics, this results in an upward-sloping demand curve, which is contrary to the fundamental laws of demand which create a downward sloping demand curve.
The term "Giffen goods" was coined in the late 1800s, which is named after the noted Scottish economist, statistician, and journalist Sir Robert Giffen. The concept of Giffen goods focuses on low income, non-luxurious products that have very few close substitutes. Giffen goods can be compared to Veblen goods which similarly do not obey the standard economic and consumer demand theory but they focus on luxury goods.
Some examples of Giffen goods are bread, rice, and wheat. These goods are common essentials with only a few near-dimensional substitutes at the same price levels.
Giffen goods are a rarity in economics because the supply and demand for these goods is opposite of standard conventions. Giffen goods can be the result of multiple market variables which include supply, demand, price, income, and substitution. All of these variables are central to the basic theories of supply and demand. Giffen goods takes into account the effects of these variables on low income, non-luxurious goods which result in an upward sloping demand curve.
The Graph Above Represents Giffen Goods
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