Giffen good


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Related to Giffen good: Engel curve
General equilibrium analysisclick for a larger image
Fig. 81 General equilibrium analysis. An increase in the price of oil is likely to increase the cost structures of many other industrial sectors, and hence serve to raise the general price level and related wage rates. This increase in prices and wages, in turn, increases input costs to the oil industry.

Giffen good

a GOOD for which quantity demanded increases as its PRICE increases, rather than falls, as predicted by the general theory of DEMAND. It applies only in the highly exceptional case of a good (see INFERIOR PRODUCT) that accounts for such a high proportion of households’ budgets that an increase in price produces a large negative INCOME EFFECT, which completely overcomes the normal SUBSTITUTION EFFECT. See PRICE EFFECT, UPWARD-SLOPING DEMAND CURVE.