Giffen

A Giffen good is a product that people consume more of as its price rises and vice versa—violating the basic law of demand in microeconomics. This occurs because the income effect of the price increase outweighs the substitution effect. In other words, as the price of a Giffen good rises, consumers' real income falls, and because the good is a substantial portion of their budget and has very few close substitutes, they end up buying more of it.

Characteristics of a Giffen good typically include:

• Inferior Good: The good must be an inferior good, meaning that demand increases as income decreases.
• Large Portion of Budget: The good constitutes a significant portion of the consumer's budget.
• Few Close Substitutes: There are few, if any, readily available substitutes for the good.

The existence of Giffen goods is rare in real-world markets, and empirical evidence supporting their existence is limited. The concept is often used in economic theory as a contrasting example to normal goods and to illustrate the complexities of demand analysis. The term is named after Sir Robert Giffen, to whom Alfred Marshall attributed the observation of the behavior in relation to the price of bread among poorer families. However, the historical accuracy of Marshall's account is debated.