### Understanding Giffen Goods

A Giffen good is a specific type of inferior good for which demand increases as the price increases, contrary to the basic law of demand in economics, which states that demand usually falls when prices rise, and vice versa. This phenomenon occurs due to the interplay between the income effect and the substitution effect.

1. **Income Effect**: For a Giffen good, as its price rises, the purchasing power of consumers effectively decreases, which leads them to consume more of the Giffen good instead of more expensive substitutes.

2. **Substitution Effect**: While one might expect that a price increase for a good would cause consumers to switch to a substitute, in the case of Giffen goods, the net effect is that consumers end up buying more of it.

### Final Answer
A Giffen good is classified as **an inferior good**, as its unique demand dynamics arise from the characteristics typical of inferior goods.

Question

### Understanding Giffen Goods

A Giffen good is a specific type of inferior good for which demand increases as the price increases, contrary to the basic law of demand in economics, which states that demand usually falls when prices rise, and vice versa. This phenomenon occurs due to the interplay between the income effect and the substitution effect.

1. **Income Effect**: For a Giffen good, as its price rises, the purchasing power of consumers effectively decreases, which leads them to consume more of the Giffen good instead of more expensive substitutes.

2. **Substitution Effect**: While one might expect that a price increase for a good would cause consumers to switch to a substitute, in the case of Giffen goods, the net effect is that consumers end up buying more of it.

### Final Answer
A Giffen good is classified as **an inferior good**, as its unique demand dynamics arise from the characteristics typical of inferior goods.

Knowee AI · Accepted Answer

### Understanding Giffen Goods

A Giffen good is a specific type of inferior good for which demand increases as the price increases, contrary to the basic law of demand in economics, which states that demand usually falls when prices rise, and vice versa. This phenomenon occurs due to the interplay between the income effect and the substitution effect.

1. **Income Effect**: For a Giffen good, as its price rises, the purchasing power of consumers effectively decreases, which leads them to consume more of the Giffen good instead of more expensive substitutes.

2. **Substitution Effect**: While one might expect that a price increase for a good would cause consumers to switch to a substitute, in the case of Giffen goods, the net effect is that consumers end up buying more of it.

### Final Answer
A Giffen good is classified as **an inferior good**, as its unique demand dynamics arise from the characteristics typical of inferior goods.

What type of good is a Giffen good?A normal goodA luxury goodAn inferior goodA complementary good

Question

What type of good is a Giffen good?

Solution

Understanding Giffen Goods

Final Answer

Similar Questions

Upgrade your grade with Knowee