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).
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Nachbar, J. (2018). Giffen’s Paradox. In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95189-5_1109
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DOI: https://doi.org/10.1057/978-1-349-95189-5_1109
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