<p>Upward sloping demand curves are rare but they can exist for a class of a good that is called Giffen good.</p>
<p>Upward sloping demand can exist because price of a good or service has two effects:</p>
<ol>
<li><strong>Substitution Effect</strong>: Higher price of a good means that people will rather buy something else.</li>
<li><strong>Income Effect</strong>: Higher price means peoples budget constraint is tighter.</li>
</ol>
<p>Now as you can learn from any 101 econ course there are two major types of a good:</p>
<ol>
<li><strong>Normal Good</strong>: Good for which income elasticity is positive (you have higher income you buy more of it e.g. taxi rides).</li>
<li><strong>Inferior Good</strong>: Good for which income elasticity is negative ( you have higher income you buy less of it e.g. public transport).</li>
</ol>
<p>Now Giffen goods are special type of inferior goods where price has income effect that dominates the substitution effect. Thus increase in price will decrease peoples  income (indirectly by making their budget constraint more binding) so much that they might consume more of that good because it is an inferior good and the income effect simply dominates the substitution effect.</p>
<p>For example, generally speaking in poor countries meat is normal good whereas some staple like rice is inferior good. If price of a rice increases people might end up consuming more of it because increase in price means they are de facto poorer (their budget constraint is more biding), rice in some countries have only few or none close substitutes so substation effect of higher price might be trivial.  In that case you can observe upward sloping demand for a good.</p>

CC BY-SA 4.0
2022-01-03T13:56:25.050Z
Just to add to 1mulfon1's answer. Some people would claim that Giffin goods don't exist in real life. There is one notable paper that showed their existence: https://www.jstor.org/stable/29730133?seq=1#metadata_info_tab_contents
Michael Gmeiner
CC BY-SA 4.0
2022-01-04T14:16:08.230Z
I understand this but I was looking for a consumer surplus analysis. Is it possible?
Polime
CC BY-SA 4.0
2022-01-04T14:38:17.697Z
@Polime consumer surplus analysis of what? Demand is not given by consumer surplus, higher consumer surplus does not translate into higher demand and vice versa. Consumer surplus is zero even in regular case of completely elastic demand, or in case of 1st degree discriminating monopolist and yet demand is nonzero
1muflon1
CC BY-SA 4.0
2022-01-03T13:42:50.713Z
2022-01-03T13:42:50.713Z
1muflon1
<p>Becker, G. S. (1991). A note on restaurant pricing and other examples of social influences on price. JPE.</p>
<p><a href="https://i.sstatic.net/xHakd.png" rel="nofollow noreferrer"><img src="https://i.sstatic.net/xHakd.png" alt="enter image description here" /></a></p>
<p><a href="https://i.sstatic.net/K7WoB.png" rel="nofollow noreferrer"><img src="https://i.sstatic.net/K7WoB.png" alt="enter image description here" /></a></p>

CC BY-SA 4.0
2022-01-05T22:09:22.090Z
+1, but it would be helpful if you would add some text explaining the picture, not every person on this site will understand them. I have hard time following them
1muflon1
CC BY-SA 4.0
2022-01-05T21:58:41.997Z
2022-01-05T21:58:41.997Z
Alalalalaki
<p>Consider the following (non-standard) utility maximisation problem :
<span class="math-container">\begin{eqnarray*} \max_{x, y} \ &amp; x^{p^2}y \\ \text{s.t.} \ &amp; px+y\leq M\end{eqnarray*}</span>
Here, <span class="math-container">$0 &lt; p &lt; 1$</span> is the price of commodity <span class="math-container">$X$</span>. In this situation, we can think of <span class="math-container">$X$</span> as a Veblen good. Solving this problem, we get the demand for <span class="math-container">$X$</span> as:
<span class="math-container">$x^d(p, M)=\left(\frac{p}{1+p^2}\right)M$</span> which is an increasing function of both price <span class="math-container">$p \in (0, 1)$</span> and income <span class="math-container">$M$</span>. So, it is not a giffen good, but still has a demand that is increasing in price.</p>
<p>Related Answer: <a href="https://qr.ae/pveKFJ" rel="nofollow noreferrer">https://qr.ae/pveKFJ</a></p>

CC BY-SA 4.0
2023-04-15T10:57:50.773Z
Please note that these are the definitions I have used in the answer: A good is said to be inferior if its demand is a decreasing function of income. An Inferior good is said to be Giffen if its demand is an increasing function of its price.
Amit
CC BY-SA 4.0
2023-03-30T00:13:57.097Z
2023-03-30T00:32:50.927Z
2023-03-30T00:32:50.927Z
Amit
<p>How can upward sloping demand curves exist given that consumer surplus will always be negative?</p>
<p>So, why would a person ever buy a positive quantity?</p>

CC BY-SA 4.0
2022-01-03T20:53:28.570Z
Veblen goods - goods whose high price is taken to indicate quality or to confer status on the purchaser - are sometimes said to have upward sloping demand curves.  However, this appears to be contentious - see for example [this explanation](https://www.economicshelp.org/blog/1164/economics/veblen-goods/) which offers an alternative analysis in terms of shifting to the right of a downward sloping demand curve.
Adam Bailey
CC BY-SA 4.0
2022-01-05T08:20:42.580Z
There is more to this question than meets the eye. It seems that consumer surplus just is not defined for badly-behaved demand curves. But there are some plausible definitions you can choose. In fact, this question has already been answered here:
https://economics.stackexchange.com/questions/34379/is-the-consumer-surplus-on-a-giffen-veblen-good-negative.
1mufflon1 defines consumer surplus as only the area above the equilibrium price, so consumer surplus is always positive. But I suppose, you may also define it as the difference in the area, above and below, in which case, if the price is high
Shaikh Ammar
CC BY-SA 4.0
2022-01-05T11:40:23.017Z
[this is rest of Shaikh Ammar's comment]  enough, the consumer surplus will be negative. You may also be interested in: Can consumer surplus be negative if a consumer is forced to make a purchase?. I have not been able to figure out a valid interpretation of this definition, but food for thought, I suppose.

Of course, which definition you choose depends on what you want to analyse, and how you wish to interpret it. It seems there really is not any strict answer in this case.
1muflon1
CC BY-SA 4.0
2023-03-31T15:23:37.753Z
@AdamBailey Please see this answer: https://economics.stackexchange.com/a/54899/11824 This answer offers a comprehensive solution that takes into account two different perspectives. On one hand, it considers the aggregate view where a change in price results in a change in demand through both changes in preferences and the standard effect seen in aggregate, as reflected by the upward sloping demand curve. On the other hand, we can also examine the effect separately by analyzing the impact of changes in preferences (due to price change) through a separate shift in the demand curve.
Amit
<microeconomics><price><demand><consumer-surplus><producer-surplus>
Upward sloping demand curves can’t exist!
Polime
# Upward sloping demand curves can’t exist!

(Asked by: username_0 on 2022-01-03)

How can upward sloping demand curves exist given that consumer surplus will always be negative?

So, why would a person ever buy a positive quantity?

**Tags:** microeconomics, price, demand, consumer-surplus, producer-surplus

> **Comments:**
> **username_1**: Veblen goods - goods whose high price is taken to indicate quality or to confer status on the purchaser - are sometimes said to have upward sloping demand curves.  However, this appears to be contentious - see for example [this explanation](https://www.economicshelp.org/blog/1164/economics/veblen-goods/) which offers an alternative analysis in terms of shifting to the right of a downward sloping demand curve.  
> **username_2**: There is more to this question than meets the eye. It seems that consumer surplus just is not defined for badly-behaved demand curves. But there are some plausible definitions you can choose. In fact, this question has already been answered here: https://economics.stackexchange.com/questions/34379/is-the-consumer-surplus-on-a-giffen-veblen-good-negative. 1mufflon1 defines consumer surplus as only the area above the equilibrium price, so consumer surplus is always positive. But I suppose, you may also define it as the difference in the area, above and below, in which case, if the price is high  
> **username_3**: [this is rest of username_2 username_2's comment]  enough, the consumer surplus will be negative. You may also be interested in: Can consumer surplus be negative if a consumer is forced to make a purchase?. I have not been able to figure out a valid interpretation of this definition, but food for thought, I suppose.  Of course, which definition you choose depends on what you want to analyse, and how you wish to interpret it. It seems there really is not any strict answer in this case.  
> **username_4**: @username_1 Please see this answer: https://economics.stackexchange.com/a/54899/11824 This answer offers a comprehensive solution that takes into account two different perspectives. On one hand, it considers the aggregate view where a change in price results in a change in demand through both changes in preferences and the standard effect seen in aggregate, as reflected by the upward sloping demand curve. On the other hand, we can also examine the effect separately by analyzing the impact of changes in preferences (due to price change) through a separate shift in the demand curve.  

---

## 3 answers

### Answer by username_3 on 2022-01-03. Score: 5

Upward sloping demand curves are rare but they can exist for a class of a good that is called Giffen good.

Upward sloping demand can exist because price of a good or service has two effects:

1. **Substitution Effect**: Higher price of a good means that people will rather buy something else.
2. **Income Effect**: Higher price means peoples budget constraint is tighter.

Now as you can learn from any 101 econ course there are two major types of a good:

1. **Normal Good**: Good for which income elasticity is positive (you have higher income you buy more of it e.g. taxi rides).
2. **Inferior Good**: Good for which income elasticity is negative ( you have higher income you buy less of it e.g. public transport).

Now Giffen goods are special type of inferior goods where price has income effect that dominates the substitution effect. Thus increase in price will decrease peoples income (indirectly by making their budget constraint more binding) so much that they might consume more of that good because it is an inferior good and the income effect simply dominates the substitution effect.

For example, generally speaking in poor countries meat is normal good whereas some staple like rice is inferior good. If price of a rice increases people might end up consuming more of it because increase in price means they are de facto poorer (their budget constraint is more biding), rice in some countries have only few or none close substitutes so substation effect of higher price might be trivial. In that case you can observe upward sloping demand for a good.

> **Comments:**
> **username_5**: Just to add to 1mulfon1's answer. Some people would claim that Giffin goods don't exist in real life. There is one notable paper that showed their existence: https://www.jstor.org/stable/29730133?seq=1#metadata_info_tab_contents  
> **username_0**: I understand this but I was looking for a consumer surplus analysis. Is it possible?  
> **username_3**: @username_0 consumer surplus analysis of what? Demand is not given by consumer surplus, higher consumer surplus does not translate into higher demand and vice versa. Consumer surplus is zero even in regular case of completely elastic demand, or in case of 1st degree discriminating monopolist and yet demand is nonzero  

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### Answer by username_6 on 2022-01-05. Score: 3

Becker, G. S. (1991). A note on restaurant pricing and other examples of social influences on price. JPE.

[![enter image description here](https://i.sstatic.net/xHakd.png)](https://i.sstatic.net/xHakd.png)

[![enter image description here](https://i.sstatic.net/K7WoB.png)](https://i.sstatic.net/K7WoB.png)

> **Comments:**
> **username_3**: +1, but it would be helpful if you would add some text explaining the picture, not every person on this site will understand them. I have hard time following them  

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### Answer by username_4 on 2023-03-30. Score: 3

Consider the following (non-standard) utility maximisation problem :
\begin{eqnarray\*} \max\_{x, y} \ & x^{p^2}y \\ \text{s.t.} \ & px+y\leq M\end{eqnarray\*}
Here, $0 < p < 1$ is the price of commodity $X$. In this situation, we can think of $X$ as a Veblen good. Solving this problem, we get the demand for $X$ as:
$x^d(p, M)=\left(\frac{p}{1+p^2}\right)M$ which is an increasing function of both price $p \in (0, 1)$ and income $M$. So, it is not a giffen good, but still has a demand that is increasing in price.

Related Answer: <https://qr.ae/pveKFJ>

> **Comments:**
> **username_4**: Please note that these are the definitions I have used in the answer: A good is said to be inferior if its demand is a decreasing function of income. An Inferior good is said to be Giffen if its demand is an increasing function of its price.  

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