Giffen Goods Definition
Giffen goods are products that see increased demand as their prices rise and decreased demand as prices fall. They were first defined by Scottish economist Sir Robert Giffen in 1980.
Unlike regular goods, Giffen goods are essential items that people continue to buy despite a price increase, due to their necessity in daily life.
Giffen goods contradict the consumer theory's law of demand which states consumers will find cheaper substitutes for a product. For Giffen goods, consumers continue buying the expensive product due to a lack of close substitutes.
Giffen Goods Meaning
Consumers often mistake Giffen goods for inferior goods. Despite price increases, they continue to demand these goods. This demand often persists even if it disrupts the consumer's budget.
Giffen Goods Examples
Common examples of Giffen goods include Rice, Sugar, Salt, Fuel, and Bread. Despite price increases, consumers continue to purchase these essential goods.
Giffen Goods vs. Veblen Goods
Veblen goods, like Giffen goods, see increased demand with increased price. However, Veblen goods are luxury items, while Giffen goods are necessities. Examples of Veblen goods include fine wines and designer handbags, while Giffen goods are items like rice and salt.