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A Giffen Good is a good which people consume more of as price rises, in violation of the Law of Demand. In most cases, consumers will purchase substitute goods when the price of a good rises. Giffen Goods behave similar to inelastic goods do. However there are no cheaper substitutes available for Giffen Goods, so consumers continue to purchase such goods. Giffen Goods are named after Sir Robert Griffen, who was attributed as the creator of this idea in Alfred Marshall's Principles of Economics. Giffen goods are mainly a theoretical concept, though an example of this may exist for a short period of time. In the future, water could become a Giffen good. It is essential that people have water to live. This will most likely be short lived as people will find a way to get their necessities regardless of the barriers in their way.
Examples of Giffen GoodsEdit
- Staple foods are an example of Giffen Goods. They are consumed by people living in poverty for the sole reason that they are unable to afford superior foodstuffs. As the price of a staple food rises, consumers are unable to supplement their diet with the more expensive foods, causing demand to increase as the price of the staple food increases. For example, bread is a cheap necessity and a diet is supplemented with meat and cheese. As the price of bread rises, while still being cheaper than meat and cheese, people cannot afford the more luxurious food, yet must still eat so they purchase more bread. Potatoes during the Irish Potato Famine are considered an example of a real world Giffen Good.
- Giffen goods are theoretical goods. In actuality, although some goods have similar qualities of Giffen Goods, they are difficult to prove. See http://www.econsoc.hist.cam.ac.uk/docs/CWPESH%20number%2015%20May%202013.pdf for the latest on the classic example of the potato in the Irish famine.