I don't understand giffen goods?

Pdav80119

4 months ago

What Is a Giffen Good?
A Giffen good is a special type of inferior good where:
When price increases, quantity demanded also increases.
This is opposite to normal demand law.
Normal Goods
Normally:
Price ↑ → Demand ↓
Price ↓ → Demand ↑
This is called the Law of Demand.
But Giffen Goods Are Different
For Giffen goods:
Price ↑ → Demand ↑
Price ↓ → Demand ↓
Strange right?
🧠 Why Does This Happen?
It happens because:
1️⃣ The good is a basic necessity
2️⃣ Consumers are poor
3️⃣ There are no close substitutes
When price rises:
Poor people can’t afford better food.
So they buy more of the cheaper basic food.
Example
Imagine very poor people eating garri or rice.
If price of rice increases:
They can’t afford meat or better food.
So they spend more money on rice because it's still the cheapest option.
So demand increases even though price increased.