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People are often heard saying "Good question". Some people suggest that, when you don't have the answer then this expression is used to acknowledge that. However, it feels more of an appreciation from a layman's point of view.

What are the instances, when I should use this expression?

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    Can mean both, "I don't know," and, "the question is insightful." – stevesliva Sep 24 '15 at 5:28
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It can be used in a variety of ways:

The person being addressed doesn't know how to answer the question.

Hm, good question! I have no idea, maybe you could try Googling it?

The person being addressed (usually teacher or lecturer) has been asked by a student. It doesn't matter if the question is obvious, saying "good question" is a useful way of keeping them engaged and confident to ask when they need help.

Good question, Mark! The Earth revolves around the sun and not the other way around.

When the question is thought provoking or well thought out.

Good question. I think the meaning of life is... what do you think?

When the person being asked is condescending.

Wow, good question. Like it wasn't totally obvious in the first place?

When you need a moment to reflect on your answer.

Good question. Hmm... well I suppose the answer would be 3.

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It is generally used to give the answerer a moment to think about the question. It is a substitute for "umm" or other sounds because it sounds less hesitant.

It doesn't mean "I don't know". It's really just space to think about the question or the answer.

-However- it can be used when the speaker doesn't know the answer. It can also be said for an insightful question that makes the speaker pause for a moment. In this case, it is truly appreciative.

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Any question which makes you pause and think could be categorised as such. It would also be a good filler word in those times when you are thinking instead of just dead silence.

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