Difference between Giffen merchandise and lower merchandise


In economics, the term "goods" is defined as a product that meets human needs, that is, something that provides utility to consumers. Various types of goods in economics are studied, such as normal goods, inferior goods, luxury goods, Veblen goods, Giffen goods. Giffen goods they are goods whose demand increases with the increase in their price and vice versa.

On the contrary, the inferior goods are those goods whose demand decreases with an increase in consumer income. Since the income effect of Giffen's assets and inferior goods is negative, the two are commonly juxtaposed with each other. Therefore, this article can help you understand the difference between Giffen products and Lower products.

Comparative graph

Basis for comparison Giffen goods Lower goods
Sense Giffen's assets refer to those goods whose demand increases with increasing prices. The inferior goods are those whose demand diminishes with the increase of the income of the consumer in a specific level.
What is it Exception to the law of demand. Determinant of demand.
Next Substitutes Do not S
Demand curve Upward sloping Negative slope
Price effect Negative Positive

Giffen property definition

Giffen goods are described as goods that show a direct relationship between price and demand, that is, the demand for good increases with an increase in price, which violates the law of demand. When the price of the good falls, consumers do not buy it anymore, as they look for better alternatives. It is due to the reason why the income effect of a higher price replaces the substitution effect. It includes those goods that consumers consider inferior and that occupy an essential place in the consumer budget, such as wheat, rice, etc.

Sir Robert Giffen, an economist, revealed the fact that, with rising bread prices, British workers bought more, which reverses the general law of demand. The reason behind this is that when the price of bread rose, it resulted in a huge decrease in the purchasing power of the poor who were forced to reduce the consumption of expensive products. And even after the rise in bread prices, it remains the least expensive food, so demand increases.

Definition of inferior goods

The goods whose quantity demanded decreases when the income of the consumer increases beyond a certain level and vice versa, are called inferior goods. In simple terms, the amount demanded by consumers for such goods is indirectly related to consumer income, so the elasticity of the demand for income is negative.

The concept of inferior goods is well known to consumers and sellers, that is, everyone knows that millet is inferior compared to wheat, kerosene is inferior to cooking gas, bidi is inferior to cigarettes, etc. Therefore, such products have better alternatives in terms of quality (called superior products). When consumer income increases, he can pay a high price item over a low price item.

Key differences between Giffen goods and inferior goods

The difference between Giffen's assets and inferior goods can be clearly established for the following reasons:

  1. The goods whose demand increases with the increase in their prices are called Giffen goods. Those goods whose demand decreases with the increase in consumer income at a specific level are known as inferior goods.
  2. Giffen goods violate the law of demand, while lower goods are part of consumer goods and services, a determining factor in demand.
  3. Giffen goods have no close substitutes. On the other hand, inferior goods have better quality alternatives.
  4. When there is one each in the price, the effect of the general price in the case of Giffen products will be negative. Against this for inferior goods, the price effect will be positive, when there is one each in the prices.
  5. The demand curve for Giffen's assets is tilted up, but down for lower goods.

Conclusion

In the first instance, these two concepts sound the same, since these two do not follow the basic consumption pattern. Therefore, these goods are treated differently by consumers when there is a change in market prices and income level, but as mentioned above, they are different. Giffen goods are a type of inferior goods and, therefore, all Giffen goods are subject to inferior goods, but the opposite is not possible.