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Question
In the case of Giffen good like bajra, a fall in its price tends to _______.
In the case of Giffen good like bajra, a fall in its price tends to _______.
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Solution
The correct option is A reduce the demand
A Giffen good is typically an inferior product that does not have easily available substitutes. They are quite rare, to the extent that there is some debate about their actual existence. So fall in the price of such good like Bajra will also reduce its demand as income effect dominates the substitution effect.
A Giffen good is typically an inferior product that does not have easily available substitutes. They are quite rare, to the extent that there is some debate about their actual existence. So fall in the price of such good like Bajra will also reduce its demand as income effect dominates the substitution effect.
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