Giffen goods are named after Scottish economist Sir Robert Giffen, a Scottish Statistician and Economist. Giffen first proposed the goods and the from his observations of the purchasing habits of the Victorian era poor. The Victorian era saw widespread poverty, largely fuelled by industrialization impacting a significant portion of the population. The poor, including the working class and the underclass, lived in unclean conditions, often facing inadequate housing, sanitation, and nutrition, and many relied on charity or workhouses which were  institutions in Britain and Ireland, primarily in the 17th-19th centuries, where those unable to support themselves financially were offered accommodation and employment in exchange for their labour.

Giffen goods are low-priced products of household which are necessary for our daily life, the demand for these goods rises along with the price rise. These products are necessary to fulfil the need for food, and they have only a few substitutes. Examples are bread, wheat, milk, eggs,  rice etc. The thought of Giffen goods undermines the elementary law of demand. The law of demand is a fundamental principle of economics that states that at a higher price, consumers will demand a lower quantity of a good. One fact remains that consumers use economic goods to satisfy their most urgent needs first.

Giffen goods are products people consider essential to their well-being, so as prices for them go up, the demand also goes up. I give here the example of cigarettes and tobacco products which characterises the Giffen’ paradox (contradiction). Cigarette prices often rise due to increased production costs, including tobacco leaf prices, especially GST. Demand can remain relatively high despite price increases due to addiction, certain socioeconomic groups being less price-sensitive.

Giffen’s paradox refers to the unexpected situation where the demand for a good increase as its price rises, challenging the law of demand. This typically occurs with inferior goods, meaning goods that consumers buy less of when their income increases. For example, when both husband and wife earn well, they don’t depend on home cooked meal, instead they  opt going out and eating. Generally, as the price of a good rises, consumers buy less of it due to reduced purchasing power and the availability of substitutes. 

The poor people who cannot afford due to their negative income effect is so strong that it overcomes the positive substitution effect as switching to cheaper alternatives. This leads to consumers buying more of the good even though its price has increased.  Example is medicines. It could potentially be considered Giffen goods, especially in critical situations they are essential for survival. Some medicines don’t have cheaper substitutes and are required for survival. Though their prices rise, the demand also rises because they are required for survival.

The Giffen paradox was first observed and described in the 19th century during the Irish famine. Historically Irish people did consume large portion of potatoes, making them a staple in their diet, especially in rural areas. Its cause was a fungal diesis caused to the potato crops, that led to huge losses in agriculture and the death of many people due to infection. This was the first time that a trend defying the previous laws of economics was noticed. One of the consequences of this event was a sharp increase in the price of bread, but it did not reduce spending on it. People gave up other foods to be able to afford expensive flour products.

Conclusion: Giffen’s paradox refers to the possibility that standard competitive demand, with nominal wealth held constant, can be upward sloping, violating the law of demand.

Bank rate

It’s the rate charged by the central bank for lending funds to commercial banks.

Balance of Trade

 It’s the difference between the monetary value of a nation’s exports and imports over a certain time period. It is usually expressed in the unit of currency of a particular country.

Black Market

The buying and selling of goods or foreign money in an illegal way.

Black economy

It’s a section of a country’s economic activity that is derived from sources that don’t follow the country’s rules and regulations regarding commerce and trade. The activities are mostly illegal in nature.

Brown economy

It’s an economy that depends on the economic growth of the petrochemicals such as coal, petroleum and natural gas, which in production, great amounts of carbon dioxide and soot are released into the atmosphere. The economic development depends on restricted resources, the environmental pollution is severe.

Blue Economy

Blue economy is a term in economics related to the exploitation, preservation and regeneration of the marine environment. Its scope of interpretation varies among organizations. According to the World Bank, the blue economy is the “sustainable use of ocean resources for economic growth, improved livelihoods, and jobs while preserving the health of ocean ecosystem.

Capital

It’s typically refers to cash or liquid assets being held or obtained for expenditures.

Cost

In production, research, retail, and accounting, a cost is the value of money that has been used up to produce something or deliver a service, and hence is not available for use anymore. In business, the cost may be one of acquisition, in which case the amount of money expended to acquire it is counted as cost.

Consumer Sovereignty

Consumer sovereignty is the economic concept that the consumer has some controlling power over goods that are produced, and the idea that the consumer is the best judge of their own welfare.

Demand  

Demand is an economic principle referring to a consumer’s desire to purchase goods and services and willingness to pay a price for a specific good or service. 

Economics

It’s the study of how people allocate scarce resources for production, distribution, and consumption, both individually and collectively.

Elasticity of Demand

It’s the responsiveness of the quantity demanded of a commodity to changes in one of the variables on which demand depends. In other words, it is the percentage change in quantity demanded divided by the percentage in one of the variables on which demand depends.

Equilibrium

In economics equilibrium is a condition or state in which economic forces are balanced. In effect, economic variables remain unchanged from their equilibrium values in the absence of external influences.

Economic Benefit

Economic benefits are defined as tangible benefits that can be measured in terms of revenue generated or money saved through the implementation of policies. An economic benefit is a benefit that we can quantify in monetary terms. Profits, net cash flow, net income, or revenue, for example, are economic benefits.

Fiscal policy

Itrefers to a government’s spending and how it affects the economy, particularly if spending levels change. Fiscal policy also refers to the tax policies of a government to influence economic conditions. It drives the policy actions of the Government. Budget, tax, subsidies, expenditure etc. form part of the fiscal policy.

GDP

Gross domestic product (GDP) is the standard measure of the value added created through the production of goods and services.  

Golden Economy

The term describes an ideal state for an economic system. In this perfect state, there is full employment, economic stability, and stable growth. It is also called sunshine economy. Emphasis is laid on energy sector. Sunshine Economy depend on non-fossil energy such as wind energy, solar energy, water, biomass energy, geothermal energy, marine energy etc. as basic energy supply to encourage distribution of facilities, to improve the energy structure.

Government spending

It refers to money spent by the public sector on the acquisition of goods and provision of services such as education, healthcare, social protection; the important areas being social welfare and defence.

Grey Market

It’s an unofficial market in goods that have not been obtained from an official supplier.

Grey Economy

The informal economy is also known to be the grey economy. This is an economy that is a diversified set of economic activities, enterprises, jobs, and workers that are not regulated or protected by the state. The grey economy helps to establish self-employment in small, unregistered enterprises. It has been expanded to include wage employment in unprotected jobs.

Green Economy

It’s a three-dimensional focus in sustaining and advancing economic, environmental and social wellbeing, to increase GDP and reduce poverty. A green economy is an economy that aims at reducing environmental risks and ecological scarcities, and that aims for sustainable development without degrading the environment. It is closely related with ecological economics, but has a more politically applied focus.

Incentives

In economics, incentives are what encourage an individual to act in a certain way. In other words, how consumers and businesses respond to market signals such as prices and financial benefits.

Inflation

Inflation is the rate of increase in prices over a given period of time. Inflation is typically a broad measure, such as the overall increase in prices or the increase in the cost of living in a country.

Law of demand

It states that quantity purchased varies inversely with price. In other words, the higher the price, the lower the quantity demanded.

Market

It’s a place where the exchange of goods and services takes place as a result of buyers and sellers being in contact with one another, either directly or through mediating agents or institutions.

Money

It’s a medium of exchange; it allows people to obtain what they need to live. Bartering was one way that people exchanged goods for other goods before money was created. Money has worth because for most people it represents something valuable. The units of measurement are dollars or another currency, with no time dimension.

Market capitalization

It’s the aggregate valuation of the company based on its current share price and the total number of outstanding stocks. It is calculated by multiplying the current market price of the company’s share with the total outstanding shares of the company.

Marginal utility

It refers to the amount of satisfaction a consumer gets by consuming a good or service. Marginal utility can be used by economists to measure how much of a good or service a consumer would buy in a given period of time.

Macroeconomics

Macroeconomics is a branch of economics dealing with performance, structure, behaviour, and decision-making of an economy as a whole; for example using interest rates, taxes, and government spending to regulate an economy’s growth and stability. This includes regional, national, and global economies.

Microeconomics

It’s a branch of mainstream economics that studies the behaviour of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms.

Monopoly

It’s a market situation where there is a single seller in the market. In conventional economic analysis, the monopoly case is taken as the polar opposite of perfect competition. By definition, the demand curve facing the monopolist is the industry demand curve which is downward sloping.

Micro Economics

Microeconomics is the study of decisions made by people and businesses regarding the allocation of resources, and prices.

Macro Economics

Macroeconomics focuses on the performance of economies; changes in economic output, inflation, interest and foreign exchange rates, and the balance of payments. 

Opportunity cost

What a business firm misses out on when selecting one option over another. It’s a way to quantify the benefits and risks of each option, leading to more profitable decision-making overall.

Oligopoly

An oligopoly is a market characterized by a small number of firms who realize they are interdependent in their pricing and output policies. The number of firms is small enough to give each firm some market power.

Optimization

It’s the process of making a trading system more effective by adjusting the variables used for technical analysis. A trading system can be optimized by reducing certain transaction costs or risks, or by targeting assets with greater expected returns.

Purple Economy

Purple Economy takes into account the ethnic, cultural, and sociological aspects of the place they operate in. Concepts such as racial equality, cultural transmission, and economic anthropology are the core tenets of this principle which draws from the ideas of both politics and capitalism. It is about looking beyond the economic value of cultural outputs to include the cultural dimension of any asset or service. Purple economy is part of a wider ethical approach.

Repo Rate

It’s the rate at which the Reserve Bank of India (RBI) lends money to commercial banks or financial institutions in India against government securities. Repo Rate in 2022 is 4.40%

Recession

In economics, a recession is a business cycle contraction when there is a general decline in economic activity. Recessions generally occur when there is a widespread drop in spending.

Red Economy

It’s related to the economy that is ruled by a government with style of communism.

Supply

 In economics, supply is the amount of a resource that firms, producers, labourers, providers of financial assets, or other economic agents are willing and able to provide to the marketplace or to an individual. Supply can be in produced goods, labour time, raw materials, or any other scarce or valuable object.

Scarcity

The gap between limited resources and theoretically limitless wants.

Sovereign bond

It’s a debt security issued by a national government to raise money for financing government programs, paying down old debt, paying interest on current debt, and any other government spending needs. Sovereign bonds can be denominated in a foreign currency or the government’s domestic currency.

Silver Economy

Silver economy is the system and structure of production, distribution and consumption of goods and services aimed at using the purchasing potential of older and ageing people and satisfying their needs, wants and consumption for a well living and health needs. All strategies are driven to face new challenges related to an ageing population (geriatrics), especially regarding technology services for wellbeing and health monitoring such as robotic assistance, electrical mobility, or health sports, including health tourism and green care.

Time value of money

It’s the concept that a sum of money is worth more now than the same sum will be at a future date due to its earnings potential in the short-term.

Unemployment

It’s a term referring to individuals who are employable and actively seeking a job but are unable to find a job. Included in this group are those people in the workforce who are working but do not have an appropriate job.

White economy

Focuses on Digital Economy and how it changed business and trading for start-ups and entrepreneurs via digital.