If a good is a Giffen good (Ie a severely inferior good), then: a. the Marshallian...

If a good is a Giffen good (Ie a severely inferior good), then:

a. the Marshallian demand curve is downard sloping but the Hicksian demand curve is upward sloping

b. The Marshallian demand curve is upward sloping but the Hicksian demand curve is downard sloping

c. Both the Marhslian demand curve and the Hicksian demand curve are downward sloping

Solutions

Expert Solution

In the case of the Giffen Good, the Marshallian Demand curve is upward sloping because such type of goods do not satisfy the law of demand. The income effect for such a good is larger than the substitution effect. However, the Hicksian demand curve is downward sloping.

Hence, option b. is Correct

Rahul Sunny answered 2 years ago

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