WBCS.LIVE practice question

In microeconomics, a Giffen good is characterized by which of the following unique behaviors?

Solve this multiple-choice question and check the correct answer with its explanation below.

Answer options

  1. Demand remains completely constant regardless of price changes.
  2. Demand increases proportionately as consumer income increases.
  3. Demand decreases as the price of a complementary good rises.
  4. Demand increases as its own price increases.

Correct answer and explanation

Correct answer: Demand increases as its own price increases.

Explanation: āœ… Correct Answer: D) Demand increases as its own price increases. šŸ“š Explanation: A Giffen good is a rare type of inferior product for which demand increases as its price increases, defying the standard law of demand. This occurs because the income effect of the price rise outweighs the substitution effect, forcing impoverished consumers to buy more of the staple good. Examples often include basic food items like bread or rice in extremely low-income demographics.