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Question:

Consider the following statements:
Statement 1: All inferior goods are Giffen goods, but not all Giffen goods are inferior goods.
Statement 2: Veblen goods and Giffen goods both have upward‐sloping demand curves.
Which of the following is most likely?

A Only one statement is correct.
Explaination

Statement 1 is incorrect. All Giffen goods are inferior goods (as the income effect of a price reduction is negative), but not all inferior goods are Giffen goods (as the income effect for inferior goods does not necessarily outweigh the substitution effect).
Statement 2 is correct. Both Veblen goods and Giffen goods exhibit a positive relationship between own‐price and quantity demanded.