- Definition of the Giffen Goods
- What is the meaning of Giffen Goods?
- Examples of Giffen Goods
- Giffen Goods vs. Veblen Goods
Definition of the Giffen Goods
In microeconomics, the Giffen goods are those products that remain more in demand when the product’s price rises and decline in demand when the product’s price decreases in the market. Sir Robert Giffen, who was a Scottish economist, first introduced Giffen goods in 1980.
Giffen goods are not ordinary goods that people buy less when their prices increase, and the other way round. In fact, it has been seen that people find these goods inevitable. People understand the necessity of these products in their day-to-day life so that they can’t avoid using them.
Giffen goods act on the phenomena that totally conflict with the law of demand of the consumer theory as, according to it, consumers generally move to the available substitutes of the product whose prices are low.
But in the case of Giffen goods, it has been seen that consumers buy the highly-priced product even more as there is a lack of close substitutes for it. This philosophy of the Giffen goods is enacted vice-versa when the product’s prices decrease.
What is the meaning of Giffen Goods?
Consumers often demand Giffen goods thinking that they are inferior goods in nature. But, in reality, it is not true. That is why they buy these goods even more, no matter how much prices are hiked. However, this condition may be confronted at times when the prices decrease, i.e., people may find Giffen goods are less worthy when they are available at low prices.
Giffen goods function as a paradox that represents consumers’ purchasing habits in a contrasting manner. These products and goods behave exceptionally. It has been noticed that there would be unconditional demand for these items at times, without caring how much the consumer’s budget is disturbed by this price-hike.
Examples of Giffen Goods
Rice, Sugar, Salt, Fuel, and Bread are some common examples of Giffen goods in daily life. Anyone can relate to the necessity of such goods in one’s life. Here is why, no matter how much the prices of rice or salt increases people definitely buy these products even in more quantities, thinking there must be chances that there would be more hikes in the prices of these products in the future and it would be better if they buy these Giffen goods at current prices in a good amount of quantity.
Giffen Goods vs. Veblen Goods
Veblen products are like Giffen Goods yet with an emphasis on extravagance things while Giffen products are a need.
Both Veblen products and Giffen Goods have a vertical inclining request bend, however, with a marginally unique concentration. Veblen goods are extravagance products and premium items while the other is needed. Instances of Veblen products incorporate fine wines,celebrity-embraced scents, extravagant satchels, and different items related with a high societal position image. Giffen Goods are non-extravagance products, yet they are a need like rice, salt, and so on.