![]() This is a crucial distinction: Hicksian curves strictly obey the law of demand, while Marshallian curves better represent real world consumer decisions. Hicksian demand curves exist to illustrate the difference between the income effect (omitted in Marshallian curves) and the substitution effect. It is true that Giffen goods are often used as a mental construction to demonstrate the limitations of Marshallian demand curves as compared to Hicksian curves. Shorn of this aspect of the demand curve the Giffen good becomes an utter impossibility 4. The criticism, then, is that just as we do not allow prices of complements, or substitutes, or the weather, or changes in tastes, or anything else, to vary as we move along a demand curve, so must we adopt an identical policy for wealth. If the good comprises a large enough proportion of the budget, and the income effect in the direction of greater purchases 3 outweighs the substitution effect toward decreased buying, then, yes, indeed, this logically implies an upward sloping demand curve. To wit, when prices fall, consumer affluence rises. This means, specifically, that wealth must not be allowed to vary. The most serious objection to the Giffen good is that nothing, nothing whatsoever, should be altered as one moves down 2 the demand curve, except, of course, price and quantity ( MISES, 1998 ROTHBARD, 2004). In section IV we offer the Z curve, the main contribution of the present paper. The burden of section III is to consider the upward sloping demand curve with a budget limit. Section II is given over to an exploration of the upward sloping demand curve. In section I we offer a criticism of this economic model. Its lesson, if a lesson there be, is that there are exceptions to general rules. ![]() 1 But most often, at least in the professional mainstream literature ( LIPSEY ROSENBLUTH, 1971 SPIEGEL, 1994), it serves as a curiosity, an aberration. At other times it is taken seriously, as a depiction of what actually happened in Irish history with the potato as Exhibit “A” in this context. It is sometimes used to “punish” naïve, unsuspecting intermediate microeconomics students who have been taught in their introductory economics courses that demand curves always slope in a downward direction. The Giffen good has had a bandit-like existence in economic theory. Palavras-chave: Curva de demanda, curva de oferta, bem de Giffen, teoria do consumidor. Em vez disso, propomos o que acreditamos ser um método mais preciso de representação gráfica dos bens de Giffen. Nosso objetivo aqui não é descartar totalmente a construção mental dos bens de Giffen. Como os bens de Giffen são uma consequência de uma redução na renda do consumidor, a curva Z ilustra os efeitos dessa mudança sobre a riqueza. Nesse artigo, discutimos brevemente os problemas do modelo tradicional, propondo um melhor: a curva Z. O modelo é muito problemático, pois implica que a demanda pode oscilar entre o infinito e um infinito negativo. A representação tradicional desse fenômeno é uma curva de demanda com inclinação ascendente. Keywords: Demand curve, supply curve, Giffen good, consumer theory.Ī demanda por um bem de Giffen é atípica, isto é, cresce conforme o preço aumenta. Rather, we bring forth what we believe to be a more precise method to graphically represent Giffen Goods. Our goal here is not to dismiss the mental construction of Giffen Goods entirely. Because Giffen goods are a consequence of a reduction in the consumer’s income, the Z curve illustrates the effects of this change on wealth. ![]() In this paper we briefly discuss the problems with the traditional model and propose a better one: the Z curve. This model is very problematic, because it implies that demand can oscillate between infinity and negative infinity, an unrealistic scenario to say the least. The traditional representation for this phenomenon is a simple upward sloping demand curve. The demand for a Giffen good is atypical, i.e.
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