Giffen good

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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.
References in periodicals archive ?
Furthermore, each good with a downward-sloping demand curve must have at least one gross substitute and each Giffen good - if there are any - must have at least one gross complement.
"The Case of a 'Giffen Good'," Journal of Economic Education, 25, 2, Spring 1994, pp.
"Giffen Goods and the Law of Demand." Journal of Political Economy, August 1982, 809-15.
"Step-Optimization, Secondary Constraints, and Giffen Goods." Canadian Journal of Economics, November 1972, 553-60.
"Experimental Confirmation of the Existence of a Giffen Good." American Economic Review, September 1991, 961-70.
For example, Boland makes a lengthy argument that neoclassical economics cannot admit the possibility of a Giffen good because such goods are inconsistent with the well-known stability conditions for market-determined prices; if the demand curve slopes upward, there may be no determinate market price.
Dougan |1982~ quite convincingly points out that little evidence would come from an analysis of market demand curves, Johnston and Larson suggest, however, that a substantial body of econometric evidence on Giffen goods exists in the agricultural economics literature.
The question of interest is how to define a Giffen good. In the original sense of Hicksian utility analysis, potential Giffen goods are generated by very unusual preferences.
The original purpose of our paper was to attempt to answer Boland's criticism of utility theory--namely that if we cannot dismiss the existence of Giffen goods we should at least be able to predict the conditions that generate them.
(1.) As pointed out by referee, Marshall's original reference to Giffen goods concerned bread and meat.
also recognizes the critical element of subsistence in his presentation of Giffen goods. In his analysis, however, the Giffen effect is generated in the conventional fashion by relying on the shape of the indiference curves.
dealt with the Giffen good by dismissing it as a theoretical possibility but a practical impossibility.