Definition of Giffen good:
A Giffen good is a low income, non-luxury product that defies standard economic and consumer demand theory. Demand for Giffen goods rises when the price rises and falls when the price falls. In econometrics, this results in an upward-sloping demand curve, contrary to the fundamental laws of demand which create a downward sloping demand curve.
The term "Giffen goods" was coined in the late 1800s, named after noted Scottish economist, statistician, and journalist Sir Robert Giffen. The concept of Giffen goods focuses on a low income, non-luxury products that have very few close substitutes. Giffen goods can be compared to Veblen goods which similarly defy standard economic and consumer demand theory but focus on luxury goods.
Consumer item having the paradoxical quality of being in greater demand when its price rises, and lower in demand when the price falls. Typically, a giffen good (such as corn in 19th century England and the alcoholic beverage shochu in modern Japan) is one considered essential by a section of consumers. As its price increases, the consumers have to spend a greater portion of their income to maintain the same level of consumption. Since they cannot now afford the more expensive substitutes, they end up buying more of the same good. The opposite happens when its price falls. Named after the UK economist Sir Robert Giffen (1837-1910) who first studied and reported this paradox.
How to use Giffen good in a sentence?
- The fashion elite frequently create Giffen good s when, for example, a particular style of purse becomes the next hot item.
- Demand for Giffen goods is heavily influenced by a lack of close substitutes and income pressures.
- A Giffen good is a low income, non-luxury product for which demand increases as the price increases and vice versa.
- Veblen goods are similar to Giffen goods but with a focus on luxury items.
- A Giffen good has an upward-sloping demand curve which is contrary to the fundamental laws of demand which are based on a downward sloping demand curve.
- The giffen good was rare but useful to understand the psychology and economy behind the purchases and decision making of consumers.
- You should try to take advantage of a giffen good when the demand is high and raise the prices accordingly.
Meaning of Giffen good & Giffen good Definition