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An inferior good is that good whose consumption is due to the consumer?s inability to afford close substitutes. When income increases (even with a price fall) the demand for such goods will reduce as consumers now go for close substitutes eg. vegetable products like sukuma wiki.
A giffen good, on the other hand, is that whose consumption takes a substantial portion of Consumer?s income so that given a price fall (and therefore an increase in real income) consumers will not buy more than before eg. salt. A fall in price of a giffen good implies that some of the household?s money income has been freed with which they can now buy more superior goods while buying less of the giffen good. It then follows that all giffen goods are inferior but not all inferior goods are giffen.
Wilfykil answered the question on February 7, 2019 at 09:57
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Date posted: February 7, 2019. Answers (1)
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Date posted: February 7, 2019. Answers (1)
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