3 ms·
That’s not the best explanation of Giffen goods, since it only covers price inelasticity. The key point of Giffen goods is that, as they become more expensive,
by blowski 3y ago
That’s not the best explanation of Giffen goods, since it only covers price inelasticity.
The key point of Giffen goods is that, as they become more expensive, you have less to spend on alternatives and thus have to buy more of the Giffen good. For example, you normally spend 10% of your income on pasta but then the price doubles. With less disposable income, you can afford less meat, so buy more pasta instead. That said, there’s very scant evidence such an effect exists in the real world.
- deleted 3y ago[deleted]