What is the difference between these two types of goods? I do not get the intuition of why the demand curve for Giffen goods is curved up…\
Can someone give me a real life example on this?
Thanks!
Giffen goods are inferior goods (negative income effect); Veblen goods are normal goods (positive income effect).
In some Asian countries, rice is a Giffen good: if the price of rice rises, people will buy more rice and less meat (which is a normal good): the income effect of rice outweighs the substitution effect.
Some luxury goods – Gucci handbags (I’m told) – are Veblen goods: if the price increases, demand increases.
So both have positive demand slopes?
Yup.