Demand for a product is, therefore, a function of its price and this relation can be mathematically depicted as:

Qx = f(Px)

Where, x is the product, Qx is the quantity demanded of the product and Px is the price of the product. Giffen's
paradox constitute of those phenomena or demand scenarios that violate the law of demand and various examples of
Giffen goods act as exceptions to the law of demand.

What are Giffen Goods?

As per the law of demand supply, with the rise in price of a commodity it's demand falls and vice versa assuming all
other factors like taste and income level remain unchanged.

Giffen's Paradox is an exception to this law. ... It is named after the 19th century British economist, Sir
Robert Giffen,

A Giffen good is something which has the reverse property. As the price goes up, people buy more of it, a seeming
paradox. But it’s a rare phenomenon and really more of an illusion.

The Giffen paradox, which was first observed by Sir Robert Giffen states that for some good ( specifically for low
quality goods which are purchased to meet the minimum consumption need of poor people) the basic law of
demand is violated. With the rise in price of a low quality but essential commodity (referred to as Giffen goods) the
demand for it further rises which is compensated through decrease in consumption of some other good.

The quintessential example of Giffen paradox is the Irish economy of the 19th century. It was observed that potatoes
which formed the basic part of the meal had an increase in price. The people in violation of demand supply law
started purchasing more potatoes to fulfill minimum consumption needs and to compensate, cut down on purchase
of costly meat.

This was the first ever noted practical example of Giffen paradox

A Giffen good, as stated above, is that product or good that defies the law of demand in terms of the relationship
between its price and quantity of demand. This particular economic paradox was propounded by Scottish economist,
Sir Robert Giffen (after whom it's named). According to this paradox, which Sir Robert Giffen arrived at after
observing the purchasing tendency of the poor Victorian subjects, the demand for a particular good tends to increase
even when its price increases. Sir Robert Giffen had observed that when the price of necessary staple goods
such as bread, food grain, vegetables, etc., rose, the poorer sections of the Victorian society, who relied heavily on
these basic staple items, gave up on purchasing other goods and concentrated all their purchasing power on
procuring the necessary staples. This kept the demand for these good high despite an increase in their price.

Conversely, when the prices of these staples go down, the consumer would, out of the consumer's surplus (the price
he has always paid and is ready to pay for the good minus the decreased price) difference that has occurred due to
the price plunge, prefer to buy less of the staples and more of superior substitutes for consumption.

There are some pre-conditions so as to explain the Giffen's paradox:

The goods taken should be inferior goods.

There should be no close substitute.
The goods should cover substantial percentage of the income of the buyer, but not so much that the buyer can't buy
any other normal good.

Some Examples of Giffen Goods

Example #1: The price of 1 kg. of potatoes (a staple) goes down from $6 to $2. The vegetable budget of the
consumer is, say, $12. Previously he used to purchase 2 kg. of potatoes for $12 every month. After the price plunge,
he would want to buy just one kg of potatoes for $2 and with the remaining $10, he can buy a larger variety of other
vegetables.

Example #2: Rice being a staple food of China, it was observed that when the price of rice was lowered the poor
people of China behaved in the Giffen manner; reducing their demand for rice and in the remaining amount
purchased more meat. When the price of rice was increased, then the demand for rice also increased as they reduced
their purchase of meat.

Example #3: Same kind of behavior was also noticed in some places where bread was the staple food. When the
price was lowered, people bought less bread and when the prices became high they consumed more of the bread,
thus explaining the Giffen's paradox.