Final answer:
A Giffen good is an inferior good for which the income effect dominates the substitution effect, causing the quantity demanded to increase as income decreases.
Step-by-step explanation:
A Giffen good is an inferior good for which the income effect dominates the substitution effect. This means that as a person's income increases, they will consume less of the Giffen good, and as their income decreases, they will consume more of the Giffen good.
For example, let's say rice is a Giffen good for a particular individual. As their income increases, they may choose to purchase more expensive foods, such as meat, and consume less rice. However, if their income decreases, they may not be able to afford meat, and therefore consume more rice. Overall, Giffen goods defy the typical relationship between price and quantity demanded, where price and quantity demanded have an inverse relationship. Instead, the income effect dominates, causing the quantity demanded of a Giffen good to increase as income decreases.