Giffen Goods
Giffen goods are inferior goods where the income effect of a price change outweighs the substitution effect, causing demand to increase when price rises. This violates the law of demand and is named after economist Sir Robert Giffen.
Real World
A 2008 Harvard study by Jensen and Miller found that when rice prices rose in Hunan, China, poor households bought more rice because their reduced real income forced them away from expensive meat and toward their staple food.
Exam Focus
Explain why the income effect outweighs the substitution effect — simply stating 'demand rises with price' is insufficient.
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