People with higher income can opt to buy a car if they no longer feel comfortable taking a bus. The demand for inferior goods is primarily dependent on consumers behavior. Basically, inferior goods have a higher demand due to persons with lower standards of living or low income.
In most cases, an unfavorable economic event can lead to higher demand of inferior goods. In some cases, customers can choose to stick with the so-called inferior goods even after having acquired higher income or raised their standard of living. For instance, take a female employee who gets an increase in salary from her employer. This is true for some people even when their raise enables them to easily purchase a Chanel bag. Also, for someone who has been drinking McDonalds since time immemorial, transitioning to Starbucks wont sound like a good idea.
Basically, inferior goods are created based on peoples sentiment, and not based on their quality, as more costly substitutes wont add additional value in most cases.
Inferior goods cannot be tagged globally, as inferior goods in some nations are costly goods in others, and vice versa. For instance, most people consider fast food as inferior goods in the United States, whereas some countries see fast food as costly. Demand on a normal good increases with higher income level in a nation. Giffen goods are rarer inferior goods without substitutes or alternative products.
Examples include; bread, rice, and wheat. The difference is that people purchase more of Giffen goods when their prices increases, despite their income level.
On the other hand, complementary goods are the ones which are used together or the goods complement the use of one another. For example, car and petrol, pen and ink. Children Day celebration in India begins. National education day: e-learning transforming educational landscape. Understanding the importance of education with e-learning transforming. JEE Main may commence the registration in the first week of Dec tentatively.
CBSE has released the term-1 admit card But when their incomes rise, they often give these up for more expensive items. Coffee is another good example. On the other hand, when a consumer's income rises, they may substitute their McDonald's coffee for the more expensive Starbucks coffee.
Other examples of an inferior good are no-name grocery store products such as cereal or peanut butter. Consumers may use these cheaper generic brand products when their incomes are lower, and make the switch to name-brand products when their incomes increase. Grocery store brand products provide an insightful example of how inferior goods are not necessarily of lower quality. Many of these goods come from the same product line as the more expensive name-brand goods.
We can also turn to transportation as an example of an inferior good. When people's incomes are low, they may opt to ride public transport. But when their incomes rise, they may stop riding the bus and, instead, take taxis or even buy cars. Demand for inferior goods is commonly dictated by consumer behavior. Typically, demand for inferior goods is mainly driven by people with lower incomes or when there's a contraction in the economy.
But that isn't always the case. Some customers may not change their behavior and continue to purchase inferior goods. Consider a consumer who gets a raise from their employer. Despite the rise in income, they may continue to buy McDonald's coffee because they prefer it over Starbucks' brew, or they may find a no-name grocery product better than the more expensive name-brand counterpart. In this case, it's just a matter of personal preference. Inferior goods aren't always the same in different parts of the world.
For example, something as simple as fast food may be considered an inferior good in the U. A normal good is one whose demand increases when people's incomes start to increase, giving it a positive income elasticity of demand.
Inferior goods are associated with a negative income elasticity, while normal goods are related to a positive income elasticity. Giffen goods are rare forms of inferior goods that have no ready substitute or alternative, such as bread, rice, and potatoes. The only difference between Giffen goods and traditional inferior goods is that demand for the former increases even when their prices rise, regardless of a consumer's income. Many Giffen goods are considered staples, especially in areas where people live in a lower socio-economic class.
When the prices of Giffen goods increase, consumers have no choice but to spend a larger amount of money on them. So they may spend more money on rice because that's all they can afford to buy—even if the price keeps rising.
Products such as meat, on the other hand, become luxuries, as they are far too unaffordable and out of reach. An inferior good is the opposite of a normal good. Skip to content Home Philosophy What is the difference between inferior goods and normal goods? Ben Davis January 4, What is the difference between inferior goods and normal goods? What are examples of Giffen goods? What are inferior goods give an example? Are necessities normal goods? What are complementary goods and substitute goods?
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