Income Effect On Giffen Goods

Income Effect On Giffen Goods. When the price of a giffen good increases, consumers allocate a larger share of their income towards it, leading to a decrease in their income. So, this article might help you in understanding the.

As indicated in the example above, rice represents 80% of the quantity demanded of grains. 13 illustrates the case of a special variety of inferior good, known as giffen good, in which case the income effect is stronger than the substitution effect.