main dietary staple of a poor population In such a situation, purchases of the item are such a large percentage of the diet of the poor that when the item’s price rises, the implicit income of the poor falls drastically In order to subsist, the poor reduce consumption of other goods so they can buy more of the staple In so doing, they are able to reach a caloric intake that is higher than what can be achieved by buying more of other preferred foods that unfortunately supply fewer calories Their preliminary empirical work shows that in southern China rice is a Giffen good for poor consumers while in northern China noodles are a Giffen good In both cases, the basic good (rice or noodles) provides calories at a relatively low cost and dominates the diet, while meat is considered the tastier but higher cost-per-calorie food Using detailed household data, they estimate that among the poor in southern China a 10% increase in the price of rice leads to a 10.4% increase in rice consumption For wealthier households in the region, rice is inferior but not Giffen For both groups of households, the income effect of a price change moves consumption in the opposite direction of the substitution effect Only in the poorest households, however, does it swamp the substitution effect, leading to an upward-sloping demand curve for rice for poor households In northern China, the net effect of a price increase on quantity demanded of noodles is smaller, though it still leads to higher noodle consumption in the poorest households of that region In a similar study, David McKenzie tested whether tortillas were a Giffen good for poor Mexicans He found, however, that they were an inferior good but not a Giffen good He speculated that the different result may stem from poor Mexicans having a wider range of substitutes available to them than the poor in China Attributed to Libby Rittenberg and Timothy Tregarthen Saylor URL: http://www.saylor.org/books/ Saylor.org 381