TYPES OF GOODS

Q. 2012 JUNE II- 21
Assertion (A): Giffin’s paradox rarely occurs in the real world.
Reason (R): Inferior goods are narrowly defined for which suitable substitutes are available.
Codes :
(A) Both (A) and (R) are correct and (R) is the correct explanation of (A).
(B) Both (A) and (R) are correct and (R) is not the correct explanation of (A).
(C) (A) is correct, but (R) is incorrect.
(D) (A) is incorrect, but (R) is correct.
ANSWER: (B) The idea of Giffen Paradox is theoretically possible but it is not easy to find suitable examples of the same in the practical sense. The inferior goods are narrowly defined for those goods which have more substitutes available. Because when more substitutes are available, consumers substitute them with cheaper goods in the market and for those goods, the demand curve tends to be more elastic. On the other hand, inferior goods are broadly defined if they are fewer substitutes available. Both statements are right but (R) is not the right explanation of (A).