Definition of Giffen good

A Giffen good, in economic theory, is a good that is in greater demand as its price increases. For example, if the price of an essential food staple, such as rice, rises it may mean that consumers have less money to buy more expensive foods, so they will actually be forced to buy more rice. Giffen goods are named after Sir Robert Giffen who wrote that he observed this purchasing behaviour in the Victorian poor. Giffen goods differ from Veblen goods which also experience rising demand at the same time as rising prices but in this case the rising price fuels their demand. Veblen goods are luxury items while Giffen goods are staple items.

 

Giffen goods in the news

In August 2011 an FT Alphaville post considered how quantitative easing could become a deflationary force and pump money into a liquidity trap where banks were more interested in capital preservation than in yield. In such a situation demand would grow for government bonds and turn them into a Giffen good

FT Articles & Analysis

No articles are associated with this term

Related Terms