Multiple choice

Assertion (A) : Giffen goods have a positively sloped demand curse. Reason (R) : The positive substitution effect in their case is more than offset by negative income effect.

  1. Both (A) and (R) are true and (R) is the correct explanation of (A)

  2. (A) is true. but (R) is false

  3. Both (A) and (R) are false

  4. Both (A) and (R) are true. but (R) is not the correct explanation of (A)
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Giffen goods are an exception to the law of demand - they have an upward-sloping demand curve. This occurs because the negative income effect (lower real income when price rises) outweighs the positive substitution effect. For Giffen goods, when price falls, the negative income effect dominates, reducing consumption. The reason correctly explains this mechanism.

Keep practicing — related questions