Published by: Zaya
Published date: 16 Jun 2021
Inferior Goods and Giffen Goods which demand curve slopes downwards and upwards respectively. Inferior goods are close substitutes and Giffen goods are no close substitutes.
If demand for a commodity varies positively with income, it is termed as inferior goods. However, there is an inverse relationship between the price of a commodity and its demand. Inferior goods can be contrasted with ‘normal’ goods which have a positive income elasticity of demand. In simple terms, the quantity demanded by consumers for such goods is indirectly related to the consumer’s income, and so the income elasticity of demand is negative.
The concept of inferior goods is very well known to consumers and sellers, i.e. it is known to all that millet is inferior in comparison to wheat, kerosene is inferior to cooking gas, bidi is inferior to cigarettes, and so on. Therefore, such goods have better alternatives regarding quality (called superior goods). When the income of the consumer rises, he can afford high-priced articles over low-priced ones.
Inferior Goods | Giffen Goods |
1. Inferior goods are goods whose demand falls down with the rise in the consumer’s income over a specified level. | 1. Giffen goods refer to those goods whose demand goes up with the rise in prices. |
2. The determinant of demand. | 2. The exception to the law of demand. |
3. Close substitutes. | 3. No close substitutes. |
4. Positive price effect. | 4. Negative price effect. |
5. Downward sloping demand curve. | 5. Upward sloping demand curve. |