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Demand — Economics STD 11 Commerce — Question

Gujarat BoardEnglish MediumSTD 11 CommerceEconomicsDemand3 Marks
Question
Explain the concept of Giffen goods.
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Answer

  • The demand for goods by individual and families are sometimes considered as backward.
  • The consumption of some goods is considered as backward too.
  • The consumers have no option but to buy such goods because of restricted income.
  • In such case, a decrease in price of these goods increases the real income and purchasing power of the consumer.
  • Therefore consumer can buy the high quality of goods.
  • They substitutes high quality goods for inferior goods .
  • It means that the reduction for them.
  • E.g. Jowar, Bajara, Rice of low quality, are inferior good.
  • These commodities are cheaper than high quality goods.
  • Therefore poor people buy these kind of commodities.
  • Suppose, a decreases in inferior good like jowar increases the demand for wheat.
  • Similarly a decrease in inferior goods like low quality of rice increases the demand for basmati rice.
  • We can say that decrease in price of inferior good reduces the consumption of inferior goods.
  • This concept was first introduced by Sir Robert Giffen.
  • Therefore these goods are known as Giffen goods.
  • The low of demand does not apply to Giffen goods.

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