but that's not all that's necessary for a giffen good. it has to price you out of substitutes
Oh, I see. I think you are conflating high value with high diminishing marginal returns. As prices of each rise, value/$ spent on Veblen goods rises, and it takes more $ to reach diminishing marginal returns on Giffen goods. These effects are not in conflict.
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the Giffen paradox is about the income effect. if your value/$ spent is going up, the income effect is in the wrong direction
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when the price of a veblen good goes up people buy more of it because it's a better deal. people getting better deals are richer not poorer
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No, the income effect is about amount of $ available, not value/$.
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You need some X. Price of X goes up, making you unable to afford expensive signalling good Y, motivating you to buy more X as an (inferior to Y) signal of wealth. Simultaneously, higher price of X improves it as a signal, also motivating you to buy more. X is Giffon and Veblen.
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but X is now better as a signal of wealth than it was, so I don't need as much of it, so I can still buy Y.
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if my money commands more value that's effectively income, even if my nominal dollars remain the same.
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Goods that signal wealth can also serve other purposes as well. Purchasing less X so you can afford Y might have other drawbacks, even if it more effectively signals wealth.
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Price of rice goes up. You can't afford as much meat now, so you buy more rice. High rice prices have made body fat a signal of wealth, so you buy more rice to gain weight. Rice is Giffen and Veblen.
End of conversation
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