Abstract
The demand for a Giffen good is atypical, i.e. it increases as prices rise. The traditional representation for this phenomenon is a simple upward sloping demand curve. This model is very problematic, because it implies that demand can oscillate between infinity and negative infinity, an unrealistic scenario to say the least. In this paper we briefly discuss the problems with the traditional model and propose a better one: the Z curve. Because Giffen goods are a consequence of a reduction in the consumer’s income, the Z curve illustrates the effects of this change on wealth. Our goal here is not to dismiss the mental construction of Giffen Goods entirely . Rather, we bring forth what we believe to be a more precise method to graphically represent Giffen Goods.
Highlights
INTRODUCTIONIt is sometimes used to “punish” naïve, unsuspecting intermediate microeconomics students who have been taught in their introductory economics courses that demand curves always slope in a downward direction
The Giffen good has had a bandit-like existence in economic theory
It is sometimes used to “punish” naïve, unsuspecting intermediate microeconomics students who have been taught in their introductory economics courses that demand curves always slope in a downward direction
Summary
It is sometimes used to “punish” naïve, unsuspecting intermediate microeconomics students who have been taught in their introductory economics courses that demand curves always slope in a downward direction. At other times it is taken seriously, as a depiction of what happened in Irish history with the potato as Exhibit “A” in this context..
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