In economics, an inferior good is a good whose demand decreases when consumer income Normal goods are those goods for which the demand rises as consumer income rises. This would be the It was noted by Sir Robert Giffen that in Ireland during the 19th century there was a rise in the price of potatoes. The poor. Explaining with diagrams, different types of goods – inferior, luxury and normal goods. rises / – % YED = /10 = ; In the above example of a normal good, income rises () 40% See: Giffen goods. Therefore, when price of a normal good falls and results in increase in the purchasing power, income effect will act in the same direction as the substitution effect.

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Various types of goods are studied in economics, like normal goods, inferior goods, luxury goods, Veblen goods, Giffen goods. Giffen goods are goods whose demand increases with the increase in its price and vice versa. As the income effect of Giffen goods and Inferior goods is negative, the two are commonly juxtaposed for one another. So, this article might help you in understanding the difference between Giffen goods and Inferior goods.

Basis for Comparison Giffen goods Inferior Goods Meaning Giffen goods refers to those goods whose demand goes up with the rise in the prices. Inferior goods are goods whose demand falls down with the rise giffeh the consumer’s income over a specified level. Exception to the law of demand.


Giffen goods are described as goods that show direct price-demand relationship, i.

When the price of good falls, consumers do not purchase it more, as they seek better alternatives. It is due to the reason that income effect of higher price supersedes substitution effect.

Price Demand Relationship: Normal, Inferior and Giffen Goods

Sir Robert Giffen, an economist, revealed the fact that, with the rise in the prices of bread, the British workers purchased more of it, that reverses the general law of demand. The reason behind this is that when the price of bread hiked, it resulted in a huge decline in the spending power of poor people that they were bound to cut down the consumption of expensive goods.

And even after the rise in prices of bread, it is still the least costly food item, so the demand for it increased. Goods whose quantity demanded decreases when the income of the consumer increases beyond a certain level and vice versa, are called inferior goods.

Different types of goods – Inferior, Normal, Luxury | Economics Help

The concept of inferior goods is very well known to consumers and sellers, i. Therefore, such goods have better alternatives regarding quality called as superior goods.

When the income of the consumer rises, he can afford high priced article over low priced one. The difference between Giffen goods and Inferior goods can be drawn clearly on the following grounds:. At first instance, these two concepts sound same as these two does not follow the basic consumption pattern.


Therefore, these goods are treated differently by consumers when there is a change in the market prices and level of income but as discussed above they are different. Giffen goods are a type of inferior goods and so all Giffen goods come under diffedence goods, but the reverse is not possible.

Briefly distinguish between normal, inferior and giffen goods?

Your email address will not be published. Goods whose demand rises with the increase in their prices are called Giffen goods. Giffen goods violate the law of demand, whereas inferior goods is a part of consumer goods and services, a determinant of demand.

Giffen goods have no close substitutes. On the other hand, inferior goods have alternatives of better quality. When there is a fall in price, the overall price effect in the case of Giffen goods will be negative. As against this for inferior goods, the price effect would be positive, when there is a fall in prices.

The demand curve for Giffen betweeb is upward sloping, but downward sloping for inferior goods.

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Giffen goods refers to those goods whose demand goes up with the rise in the prices.