What are the differences between Giffen Goods and Inferior goods? I need the BASISof differences mainly.
Inferior goods and giffen goods are differentiated on the basis of the relationship between the demand of these goods with the price. Inferior goods share a negative relationship with the price. That is, as the price of the good rises, the demand for inferior goods falls. On the other hand, giffen goods share a positive relation with the price. That is, as the price rises, the demand for giffen goods rises.
This difference can also be stated in the sense that while inferior goods do not violate the law of demand, on the other hand, giffen goods violate the law of demand.
Type of Good | Relationship with price | Law of Demand |
Inferior | Negative | Do not violate (follow) |
Giffen | Positive | Violate |