Slutsky and Hicks Decompositions - Definitions

[Home] [Main] [General Dynamics] [Definitions]
[Ordinary and Superior Good] [Ordinary and Inferior Good] [Giffen and Inferior Good]

Ordinary Good (See Applet)

Good X is an ordinary good if a rising (falling) price p_x makes the consumption of good X decrease (increase). Most of the consumption goods we know are ordinary goods.

Giffen Good (See Applet)

Good X is a Giffen good if a rising (falling) price p_x makes the consumption of good X increase (decrease). Giffen goods are very rare. Some examples for Giffen goods from the literature are:

• Marshall (1895): bread (vs. more expensive food) among poor households (originally reported by Robert Giffen)
• Bopp (1983): kerosene (vs. regular heating fuel) among poor households
• Gilley and Karels (1991) or Jensen and Miller (2008): high calorie food (vs. low calorie food)
• Spiegel (1994): public transport (vs. private transport)

Superior Good (See Applet)

Good X is a superior good if a rising (falling) income m makes the consumption of good X increase (decrease). Most of the consumption goods we know are superior goods.

Inferior Good (See Applet)

Good X is an inferior good if a rising (falling) income m makes the consumption of good X decrease (increase). Inferior goods are often cheap low-quality goods. Consumers substitute these goods by better and more expensive goods when their income rises. For example, long-distance bus travel is mainly purchased by low-income groups, whereas higher-income groups prefer air travel.

References:
Bopp, A. 1983. The demand for kerosene: A modern Giffen good, Applied Economics 15, 459 - 467.
Gilley, O. and Karels, G. 1991. In search of Giffen behavior, Economic Inquiry 29(1), 182 - 189.
Jensen, R. and Miller, N. 2008. Giffen Behavior and Subsistence Consumption, American Economic Review 98(4), 1553 - 1577.
Marshall, A. 1895. Principles of Economics, 3^rd edition, London: Macmillian.
Spiegel, U. 1994. The case of a "Giffen Good", Journal of Economic Education 25, 137 - 147.

© Dr. Jens Peter Siebel, last update 03/11/2011