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Banking Term Giffen Goods

Feb 18, 2015 16:57 IST

    Giffen Goods are those Goods whose demands do not increase with rise in level of income. The goods which do not obey the laws of demand are Giffen Goods.

    In other words, a good where higher price causes an increase in demand (reversing the usual law of demand). The increase in demand is due to the income effect of the higher price outweighing the substitution effect.

    Question: What will be the shape of demand curve in case of Giffen Goods?

    1. Negatively
    2. Vertical
    3. Positively
    4. None of these

    Ans: A

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