Individual and market demand - The income and substitution effects of a price change - Giffen goods
3 important questions on Individual and market demand - The income and substitution effects of a price change - Giffen goods
The law of demand states that the demand dor a good should fall if the price of that good increases. By contrast, a Giffen good is one:
The two characteristics that a Giffen good would logically have to posses:
2. It has a relatively small substitution effect, one small enough to be overwhelmed by the income effect.
The demand for a product can increase the higher the price, but this does not always imply the product in question is a Giffen good. For example, a Veblen good is a good:
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