Question

Price elasticity of demand for Giffen goods is

• A. Negative
• B. Positive
• C. Zero
• D. None of these

Hint:

Normal goods have negative price elasticity. Giffen goods are the rare exception with positive price elasticity (price up, demand up).

Answer 1

The Correct Option is B

Giffen goods are a rare exception to the Law of Demand. They are highly inferior goods for which the income effect of a price change is so strong and negative that it outweighs the substitution effect. For a Giffen good, when the price increases, the quantity demanded also increases. This creates a direct or positive relationship between price and quantity demanded. Therefore, the price elasticity of demand is positive.