What is a Giffen good?
A Giffen good is one for which higher prices increase quantity demanded. Alfred Marshall, in the 3rd edition of *Principles of Economics* (1895), attributed to Robert Giffen the observation that when bread prices rose, poor labouring families cut back on meat and bought more bread. It is the classic exception to the law of demand.
📌 At a glance
- Named after
- Robert Giffen (via Marshall, 1895)
- Type
- A special inferior good
- Condition
- Income effect > substitution effect
- Evidence
- Jensen & Miller (2008), rice in Hunan, China
Why it happens
| Effect | Meaning | For a Giffen good |
|---|---|---|
| Substitution | Switch away from the pricier good | Demand falls |
| Income | Lower real income changes the basket | Demand rises (inferior good) |
Evidence
Jensen and Miller (2008) randomly subsidised staple prices for poor households in Hunan and Gansu, China, and found evidence of Giffen behaviour for rice in Hunan.
Frequently asked questions
- What is a Giffen good?
- An inferior good whose demand rises as its price rises because the income effect outweighs the substitution effect.
- How is it different from a Veblen good?
- Giffen behaviour comes from poverty and the income effect; Veblen demand comes from status display.
References
- Marshall, A. (1895). Principles of economics (3rd ed.). Macmillan.
- Jensen, R. T., & Miller, N. H. (2008). Giffen behavior and subsistence consumption. American Economic Review, 98(4), 1553–1577.