Asked by Bruno Vieira on Jun 26, 2024
Verified
When other variables are held fixed, the demand for a Giffen good rises when income increases.
Giffen Good
A product that experiences an increase in demand as its price rises, contrary to standard economic theory, due to its role as a staple good.
Income Increases
A situation where an individual's or household's earnings rise, leading to potential changes in spending behavior.
- Distinguish between normal, inferior, and luxury goods by understanding their relationship with income elasticity.
Verified Answer
PS
Preety SumraJun 27, 2024
Final Answer :
False
Explanation :
A Giffen good is a type of inferior good where an increase in its price results in an increase in its quantity demanded. This is contrary to the law of demand. As such, the demand for a Giffen good will not rise when income increases, but rather will fall.
Learning Objectives
- Distinguish between normal, inferior, and luxury goods by understanding their relationship with income elasticity.