The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Giffen’s Paradox

  • John Nachbar
Reference work entry
DOI: https://doi.org/10.1057/978-1-349-95189-5_1109

Abstract

Giffen’s paradox refers to the possibility that standard competitive demand, with nominal wealth held constant, can be upward sloping, violating the law of demand. From the Slutsky equation, Giffen’s paradox arises if and only if a good is inferior and the income effect is larger than the absolute value of the substitution effect. A Giffen good is a good for which Giffen’s paradox can arise. Giffen preferences are preferences that can exhibit Giffen’s paradox. For explicit examples of Giffen preferences, see Moffatt (2002) and Sorensen (2005).

Keywords

Comparative statics General equilibrium Giffen good Giffen preferences Giffen, R Giffen’s paradox Income effect Law of demand Preference externalities Revealed preference Slutsky equation Substitution effect 
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Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • John Nachbar
    • 1
  1. 1.