In
economics and
consumer theory, a
Giffen good is a product that people consume more of as the price rises and vice versa—violating the
law of demand. For any good, as the
price of the
good rises, the substitution effect makes consumers purchase less of it, and more of
substitute goods; for most goods, the
income effect (due to the effective decline in available income due to more being spent on existing units of this good) reinforces this decline in demand for the good. But a Giffen good is so strongly an
inferior good (being more in demand at lower income) that this contrary income effect more than offsets the substitution effect, and the net effect of the good's price rise is to increase demand for it.