Giffen goods

Giffen Goods – In microeconomics, Giffen goods are a special category of products for which demand increases as their price rises and decreases when their price falls, contrary to the typical law of demand. This phenomenon occurs when the income effect outweighs the substitution effect, usually for inferior goods that form a large portion of a consumer’s budget. The concept is named after Scottish economist Sir Robert Giffen, who observed this behavior in staple foods like bread and rice among low-income households.

Example: If the price of rice rises, poor households may buy more rice instead of substituting it with costlier alternatives, because rice remains the cheapest way to meet calorie needs.