Daily Axiom

The Giffen paradox describes the phenomenon, that in certain situation there is more demand for a good as the prices rises - instead of dropping as conventionally expected.

The effect can be observed for goods that are affordable and fulfil their purpose, but where consumers would strive to replace their consumption by higher regarded goods. Key feature is that there is no more affordable alternative to meet a fundamental need these goods can meet.

For example people living with a low income might meet their nutritional need for protein with beans, but prefer meat once their income rises. As the bean price get higher, there would be less income to spent on meat – leading to a higher bean consumption despite the higher price.

Other classic examples for the Giffen paradox include public transit, payday loan or second hand clothes.