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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