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Giffen good

Definition:
A PRODUCT which does not seem to obey the 'law of demand', as more is bought as the price rises and vice versa. This special case is named after the Victorian economist Sir Robert Giffen, who is attributed with noting an actual example. He noted that, among the British labouring classes of the nineteenth century, when the price of bread (their staple diet) rose, their consumption of bread also rose. When the price of bread fell, consumption fell. This was contrary to the normal concept of demand varying inversely with price. The reason for this is as follows. When a CONSUMER'S expenditure on any product takes up a significant part of his or her INCOME, then any increase in the price of the product will have a resultant effect of reducing consumers' real income (and vice versa). If that product is an inferior good, a fall in income will cause a rise in demand. Sir Robert Giffen observed that when bread became costlier, the poorer people were left with less of their income to spend on other more expensive foodstuffs and so they actually bought more bread.

Cross-References:
[income] [consumer] [product]

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© Westburn Publishers Ltd 2002, The Westburn Dictionary of Marketing edited by Michael J Baker, ISBN 978-0-946433-01-8. www.themarketingdictionary.com. Entry: [Margaret D. Potts and Michael J. Baker],.