Giffen Goods and Veblen Goods

Published on April 25, 2020
In certain cases, it is found that the Law of Demand does not hold good. These items have positively sloped demand curve—a decrease (increase) in price may result in a decrease (increase) in the quantity demanded.
  • These goods are classified as:
    1. Giffen Goods
    2. Veblen Goods

Giffen Goods

Giffen goods are basically a type of inferior goods which has no close substitutes. The existence of Giffen Goods was propounded by Robert Giffen.

Example: Potato and Cheese (Irish Famine Case Study)
  • A poor consumer spends a large part of his income on potatoes as it is one of the cheapest vegetables available in the market. Cheese, on the other hand, is considered a superior food item that can be said to be consumed in place of potatoes but is expensive to buy. When the price of potatoes rises, people give up spending on all other goods and concentrate all their purchasing power towards procurement of potatoes as that is a necessary staple for them and there is no other close substitute. However, when the price of potatoes falls, people decrease their consumption of potatoes even further to make use of their increased purchasing power to buy more superior goods like cheese. That’s how Giffen goods work and defy the law of demand.

Veblen Goods

Veblen goods are prestige goods such as antique paintings, artefacts, luxury cars, diamonds etc. These goods are considered as status symbols. They are wanted for prestige and distinction. Therefore, the higher the price, the higher is the worth of these goods. On the other hand, if the price falls, value/ prestige associated with the goods also falls down leading to a fall in quantity demanded of the good as well.


  • Both Giffen and Veblen Goods do not follow the law of demand. This means that as the price rises, demand also increases for these goods.
  • The income effect is so strong and so negative that it overpowers the substitution effect.

Demand Curve for Giffen and Veblen Goods

giffen goods

About me

ramandeep singh

My name is Ramandeep Singh. I authored the Quantitative Aptitude Made Easy book. I have been providing online courses and free study material for RBI Grade B, NABARD Grade A, SEBI Grade A and Specialist Officer exams since 2013.

Subscribe to our email newsletter
Close Menu
Close Menu