Ayushi posted an Question
August 13, 2020 • 18:18 pm 30 points
  • UGC NET
  • Economics

73. in case of a giffen good, the income effect (1) more than offsets the substitution effect (2) is equal to the substitution effect (3) reinforces the substit

73. In case of a Giffen good, the income effect (1) More than offsets the substitution effect (2) Is equal to the substitution effect (3) Reinforces the substitution effect 4) Only partially offsets the substitution

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    Nidhi taparia Best Answer

    73. the answer is (1). In case of a Giffen good, the negative income effect is very strong so much so that it completely nullifies substitution effect and results in an exception to law of demand. This is because Giffen goods are very inferior goods by nature.

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