ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Price and demand are positively correlated in case of Giffen goods. A Giffen good is a product for which demand increases as the price increases and falls when the price decreases.

Detailed explanation-2: -A positive correlation can be seen between the demand for a product and the product’s associated price. In situations where the available supply stays the same, the price will rise if demand increases.

Detailed explanation-3: -Unlike other goods or services, the price point at which supply and demand meet results in higher prices and greater demand whenever market forces recognize a change in supply and demand for Giffen goods. As a result, when price goes up, the quantity demanded also goes up.

Detailed explanation-4: -In the case of ‘Giffen goods’ there is direct price demand relationship. Therefore the demand curve is upward sloping to the right which is contrary to the fundamental law of demand, which states that the quantity demanded for a product falls as the price increases, resulting in a downward slope for the demand curve.

Detailed explanation-5: -The demand for these (Giffen) goods rises on increasing the price. It is contrary to the fundamentals of the law of demand as it creates an upward slope, unlike the downward-sloping demand curves of other goods that obey the law of demand. Examples of Giffen Goods: Rice, Wheat, and bread.