What additional condition makes an inferior good Giffen?
Giffen behavior requires an opposing income effect large enough to overturn substitution.
Follow the cause and effect
Use the income-effect sign to classify normal or inferior.
Add SE+IE to determine Marshallian demand direction.
Use the expenditure function for money-metric welfare.
The model you are using
Conditions for this model
Money income is fixed and there is no goods endowment; the decomposition numbers are a hypothetical scenario.
The exam trap
Inferior does not mean Giffen, and downward demand does not prove a good is normal.
Connect the reasoning to the graph
What changes
- Giffen demand slopes upward only where the income effect dominates substitution, not everywhere.
What stays fixed
Money income is fixed and there is no goods endowment; the decomposition numbers are a hypothetical scenario.
Keep these conditions throughout the comparison; change only what the case above specifies.
What to inspect
Use the expenditure function for money-metric welfare.
Compare before and after, and locate the conclusion on the graph.
5 MINUTES · TRANSFER THE IDEA
Can you explain it without the lesson?
For a price rise with SE=−3 and IE=+5, classify the good and state the total quantity effect.