Goods with upward sloping demand curves are referred to as
substitute goods.
Giffen goods.
Marshall goods.
luxury goods.
The correct answer and explanation is :
The correct answer is Giffen goods.
Explanation:
A Giffen good is a type of inferior good for which an increase in its price leads to an increase in quantity demanded, which contradicts the basic law of demand in economics. According to the law of demand, when the price of a good rises, the quantity demanded typically decreases. However, for Giffen goods, the demand curve slopes upward, which is a rare and unusual phenomenon in economics.
The Giffen good phenomenon occurs under specific conditions, typically in situations where the good in question is an inferior good (a good that people consume more of when their income decreases) and when the income effect (the change in demand due to a change in purchasing power) outweighs the substitution effect (the change in demand due to relative prices).
For example, imagine a situation in a poor community where bread is a staple food, and the price of bread rises. While the substitution effect suggests that consumers would buy less bread and substitute it with other goods, the income effect might be so strong that consumers, whose income is already low, now cannot afford more expensive alternatives and end up purchasing more bread despite the higher price. This results in the demand curve sloping upward. The bread, in this case, becomes a Giffen good.
It’s important to note that Giffen goods are rare, and empirical examples are scarce. Nevertheless, they serve as a key concept in the study of consumer behavior and economic theory, particularly in understanding the complexities of demand and income effects.
Visual Representation:
Here is the visual representation of the Giffen good demand curve, illustrating the upward-sloping relationship between price and quantity demanded. This curve demonstrates how, in the case of Giffen goods, demand increases as price rises, contrary to the usual law of demand.