Pete consumes two goods, rice and fish. When the price of fish rises, he consumes less fish. When the price of rice rises, he consumes more rice. For Pete,
A)fish is not a Giffen good but rice is.
B)rice is not a Giffen good but fish is.
C)both fish and rice are normal goods.
D)both fish and rice are Giffen goods.

Question

Quizplus · Accepted Answer

A Giffen good is one where an increase in price leads to an increase in quantity consumed. Since Pete consumes more rice when its price rises, rice is a Giffen good. Fish is not a Giffen good because he consumes less of it when its price rises.

Pete Consumes Two Goods, Rice and Fish