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Talk:Giffen good/Archives/2013

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Disputed statement

I dispute the following statement:

The great recession has raised the possibility that very safe financial assets (Treasuries, cash, gold) become Giffen goods in liquidity trap scenarios or during bad economic times. As investors fear lower returns in equities and other investments they minimize risk by purchasing more of a low return, higher price asset that is considered safer.

Investors in this situation are not buying the treasuries because of the higher price; they are simply trying to avoid risk like any rational actor in the economy. Furthermore, it does not satisfy the aforementioned criteria to be considered a Giffen good. Namely, treasuries are definitely not inferior goods, and they (generally speaking) don't constitute a large proportion of a buyer's income.

Finally, the linked source appears to be a blog, so I'm not sure it satisfies WP:RELIABLE. - Sweet Nightmares 17:19, 17 September 2012 (UTC)

I concur in disputing the above statement. The blog post listed does provide a more nuanced analysis of why the author believes treasuries to be a Giffen good, but it still violates the basic definition of these goods, namely, that quantity demanded increases solely as a function of price. The author tries to make the claim that the price increased as a function of the decreased risk-adjusted value of the bonds. However, this is not a metric used in the definition of the goods. Instead, this should be treated as a decrease in quality. Additionally, the period in question (the heart of the 2008 financial crisis when investors flocked to treasury bills immediately after their downgrade) was so chaotic that a causal relationship would be difficult to demonstrate amid the downgrading and huge perception of risk regarding other investment options, so while the quality of treasury bills may have been formally downgraded, the quality of other options may have seemed even lower to many investments, allowing these goods to be explained by a conventional supply and demand model. Because of this, I agree that the above statement should be removed from this article. --User:Beezorphlegmon 20:11, 16 January 2013 (UTC)

I fixed the diagram. "Indifference curves do not intersect each other." are now satisfied, and changed position of budget line to explain substitution effect. Best regards. Kwj2772 (talk) 07:01, 21 April 2013 (UTC)