The Difference Between an Inferior Good and a Giffen Good

question 72

Multiple Choice

The difference between an inferior good and a Giffen good is that:

• A)the substitution effect of a price increase raises consumption for a Giffen good but decreases consumption of an inferior good.
• B)the income effect is larger than the substitution effect for a Giffen good but is smaller than the substitution effect for the inferior good.
• C)the income effect is smaller than the substitution effect for a Giffen good but is larger than the substitution effect for the inferior good.
• D)a Giffen good is a special case of a normal good and is therefore quite different from an inferior good.

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Definitions:

Liability

A financial obligation or amount that an individual or entity owes to another.

Misrepresented Authority

An instance where someone incorrectly asserts or implies they have the power to act on behalf of another party, potentially leading to binding agreements or legal consequences.

Personal Liability

Personal liability means an individual's legal responsibility to fulfill debts or obligations, which can extend to their personal assets.

Non-existent Corporation

A corporation that either has not been legally established or has been dissolved, thereby lacking legal recognition.