Abstract

This paper raises an approach to the study of consumer behaviour and markets with a particular emphasis on agricultural commodities. It develops an analysis of demand for certain products during a recent economic recession in Spain by showing the behaviour of some of them as Giffen goods in some years. According to the theory of Giffen demand, there is a direct (positive) relationship between price and the quantity demanded. Thus, the income effect outweighs the substitution effect. The main contributions of this work can be summarized in the next three points: 1) This paper studies the consumer behaviour from a Giffen perspective, beyond a traditional and rational utility approach; 2) It also suggests a framework to analyse several socioeconomic proposals and theories related to the sustainability and Human Rights-based ethic level (intrinsic to Giffen behaviour); 3) Finally, this theory is a significant contribution to design better economic policies. The analysis of Giffen phenomenon has greater explanatory power than the classical theory of Marshall. It also helps to reveal a number of important effects that are usually ignored and that could contribute to clarify some current economic phenomena.

Highlights

  • The theory of Giffen or positive-sloping demand states that there is a direct relationship between price and quantity demanded, calling seriously into question the law of downward-sloping demand set out by Marshall (1890)

  • The main contributions of this work can be summarized in the three points: 1) This paper studies the consumer behaviour from a Giffen perspective, beyond a traditional and rational utility approach; 2) It suggests a framework to analyse several socioeconomic proposals and theories related to the sustainability and Human Rights-based ethic level; 3) this theory is a significant contribution to design better economic policies

  • The traditional conditions for the emergence of Giffen goods arise in an economic context of permanent crisis, combined with continued reductions in income (Jensen, Miller 2008), generating a state of insecurity that leads to all consumer activity being considered as the consumption of staples

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Summary

Introduction

The theory of Giffen or positive-sloping demand states that there is a direct relationship between price and quantity demanded (given a set of conditions), calling seriously into question the law of downward-sloping demand set out by Marshall (1890). The traditional conditions for the emergence of Giffen goods arise in an economic context of permanent crisis, combined with continued reductions in income (Jensen, Miller 2008), generating a state of insecurity that leads to all consumer activity being considered as the consumption of staples. Marketing strategy and consumer income levels affect whether the nature of goods change from normal to inferior and vice versa, depending on the economic circumstances This is the first study whose objective is the analysis of the Giffen phenomenon in the present financial and economic crisis situation in Europe. Revision of Giffen demand theory, empirical analysis on the possibility of Giffen evidence in some Spanish agrifood products among the years of the economic crisis from 2006 to 2010, policy recommendations and conclusions

The classical theory of Giffen phenomenon
The equilibrium situations
The “Saving Effect”
Consumer equilibrium
A numerical example
Spanish fruits and vegetables 2006–2010
Policy recommendations
Findings
Conclusions

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