Question 9
Theory of DemandGiffen commodities are those commodities
- A.which give rise to a cobweb situation
- B.for which demand increases as price increases
- C.which have a low price elasticity of demand
- D.which are in short supply
- E.which have a high income elasticity of demand
Show the answer and explanation
Answer: B (for which demand increases as price increases)
Explanation
Giffen goods are inferior staples whose quantity demanded rises when their price rises, an exception to the law of demand.