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Which statement about the relationship between Giffen goods and inferior goods is correct?
AGiffen goods and inferior goods are exactly the same set
BAll inferior goods are Giffen, but not all Giffen goods are inferior
CAll Giffen goods are inferior, but not all inferior goods are Giffen
DGiffen goods and inferior goods never overlap at all
Answer & Solution
Correct answer: C. All Giffen goods are inferior, but not all inferior goods are Giffen
1. Giffen goods are a special subset that are inferior, lack close substitutes, and dominate the budget.
2. The text states all Giffen goods are inferior goods.
3. But all inferior goods are not Giffen goods.
4. Hence Giffen is a subset of inferior, matching option A.
_Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 2 Unit I "Law of Demand and Elasticity of Demand", p.11_
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