Economics • Economic BasicsMedium
What is meant by 'Giffen Good' in microeconomics?
A. A good whose demand increases as its price increases, violating the law of demand✓ Correct Answer
B. A luxury good consumed exclusively by the wealthy class
C. A good provided by the government free of cost to the public
D. A good imported from a foreign country under bilateral trade agreements
💡 Solution & Explanation
A Giffen good is an inferior product that defies the standard law of demand because its negative income effect outweighs its substitution effect, causing higher consumption as the price rises. Other choices incorrectly classify luxury items or government-supplied goods, neither of which exhibit this specific price-demand anomaly. Giffen goods are traditionally illustrated using historical examples such as staple foods during famine conditions.
More Economics Economic Basics questions
- In microeconomics, what does the 'Samuelson's Revealed Preference Theory' fundamentally derive?
- Which of the following curves represents the inverse relationship between the rate of inflation and…
- In microeconomics, what does the 'Scarcity' principle fundamentally imply for economic agents?
- What does the 'Permanent Income Hypothesis' imply regarding a consumer's marginal propensity to consume (MPC)…
- Which of the following theorems in welfare economics asserts that any Pareto efficient allocation can be…