Question

Among the well-known exceptions to the Law of Demand, Giffen Goods represent a special case where a fall in price does not lead to the usual increase in quantity demanded. What best explains this unusual behaviour?

Q: Answer-Among the well-known exceptions to the Law of Demand, Giffen Goods represent a special case where a...

Giffen Goods are an exception to the Law of Demand because, for certain low-priced necessities, a fall in price can lead to no changeor even a decreasein quantity demanded, often due to the strong negative income effect dominating the substitution effect.