Which of the following statements is NOT true? An inferior good may either be ordinary or Giffen. An inferior good will be a Giffen good when the substitution effect outweighs the income effect. A Giffen good is always inferior. A normal good is always ordinary. An ordinary good may either be normal or inferior.
Question
Which of the following statements is NOT true? An inferior good may either be ordinary or Giffen. An inferior good will be a Giffen good when the substitution effect outweighs the income effect. A Giffen good is always inferior. A normal good is always ordinary. An ordinary good may either be normal or inferior.
Solution
The statement that is NOT true is: "An inferior good will be a Giffen good when the substitution effect outweighs the income effect."
This is incorrect because a Giffen good is a type of inferior good where the income effect outweighs the substitution effect. When the price of a Giffen good increases, consumers actually buy more of it, rather than less, which is contrary to the law of demand. This happens because the income effect (the change in consumption resulting from a change in real income) is stronger than the substitution effect (the change in consumption patterns due to a change in the relative prices of goods).
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