The correct answer is: A. All Giffen goods are inferior goods.
A Giffen good is a good for which the demand increases as the price increases. This is because the good is so essential to the consumer’s budget that they are willing to spend more money on it even as the price increases.
An inferior good is a good for which demand decreases as income increases. This is because as people’s income increases, they tend to spend less on goods that are considered to be necessities and more on goods that are considered to be luxuries.
Giffen goods are a type of inferior good. However, not all inferior goods are Giffen goods. For example, if the price of bread increases, people may buy less bread and more rice. This is because bread is not as essential to the consumer’s budget as rice.
The other options are incorrect because:
- B. All inferior goods are citizen goods is incorrect because not all inferior goods are Giffen goods.
- C. Giffen goods have positive income effect and negative substitution effect is incorrect because Giffen goods have a negative income effect and a positive substitution effect.
- D. Giffen goods have positive substitution effect is incorrect because Giffen goods have a negative substitution effect.