Giffen Paradox:
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Sir Robert Giffen discovered that the poor people will demand more of inferior goods if their prices rise and demand less if their prices fall. Inferior goods are those goods which are cheaper as compared to their substitutes. For example, in case of rice, normal rice is cheaper than basmati. Now, a middle class family demands 1 kg of basmati and 9 kg normal rice (total 10 kg) per month. If price of rice falls, he will demand more basmati say 2 kg and only 8 kg normal rice (total 10 kg). Thus, as price of rice decreases, demand of normal rice (inferior quality) also decreased. This is called ‘Giffen Paradox’. In these cases, the law of demand has an exception.