In economics

Economics

Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...

 and consumer theory

Consumer theory

Consumer choice is a theory of microeconomics that relates preferences for consumption goods and services to consumption expenditures and ultimately to consumer demand curves. The link between personal preferences, consumption, and the demand curve is one of the most closely studied relations in...

, a Giffen good is one which people paradoxically consume more of as the price rises, violating the law of demand

Law of demand

In economics, the law of demand is an economic law that states that consumers buy more of a good when its price decreases and less when its price increases ....

. In normal situations, as the price

Price

-Definition:In ordinary usage, price is the quantity of payment or compensation given by one party to another in return for goods or services.In modern economies, prices are generally expressed in units of some form of currency...

 of a good

Good

Good may refer to:* Good and evil - The distinction between positive and negative entities* Good - Objects produced for market* Form of the Good - Plato's macrocosmic view of goodness in living* Good...

 rises, the substitution effect causes consumers to purchase less of it and more of substitute good

Substitute good

In economics, one way we classify goods is by examining the relationship of the demand schedules when the price of one good changes. This relationship between demand schedules leads economists to classify goods as either substitutes or complements. Substitute goods are goods which, as a result...

s. In the Giffen good situation the income effect dominates, leading people to buy more of the good, even as its price rises.

Evidence for the existence of Giffen goods is limited, but microeconomic mathematical models explain how such a thing could exist.