Write short notes:
1. Giffen's paradox
ANSWER:
Giffen's paradox
1. We know that, according to the Law of Demand, when the price of a commodity falls the demand for it rises. However, giffen goods are an exception to this Law. In case of giffen goods, the demand shares a positive relationship with price. As the price of giffen goods fall the demand for such goods falls. This is because as the price falls, the real income of the consumer rises and thereby, the consumer shifts to better superior quality goods. Such goods are highly inferior goods. It is named after the 19th century British economist, Sir Robert Giffen, who found that when the price of bread fell, the demand for it also fell.
