Understanding inferior goods

Poor-quality goods are products that people tend to buy more when their income levels are low and consume less as their income increases.。These goods differ from ordinary goods in that they react in opposite directions to changes in income。For ordinary goods, demand usually increases with income; for inferior goods, demand decreases as people's purchasing power grows。

Poor-quality goods are not necessarily worse than other products, although they do tend to be cheaper。Note that the term refers to product demand relative to revenue。

For instance

If you are in college and spend all your time studying, you have little time for odd jobs.。Plus, all your money goes to pay for tuition and books.。Your income may be negative because you applied for a student loan。

On a tight budget, you have to save。So, you probably ate a lot of fast food。After graduation, your income situation will change。Now that you have more money, maybe a smoked turkey or honey ham on a sandwich。In fact, as you make more money, your demand for cheap fast food will decrease, which means it is an inferior commodity。

What are some examples of poor quality goods?？

Poor-quality goods tend to be relatively cheap things, and as income increases, fewer goods are purchased。Because of their affordable prices, they are the most frequently purchased products for low-income people。

Therefore, inferior goods are often low-priced versions of certain necessities (especially food)。Rice, pasta, instant noodles, canned pasta sauce, burgers, bread, cereal, fast food and generic brand products are all examples。

Similarly, non-branded clothing, shoes, shampoo and other products will be treated as inferior goods。In most cases, public transportation is also inferior, because if people can afford Uber or their own vehicles, they tend not to take buses frequently。

Do people reject inferior goods？

Poor quality goods are still the ones people tend to buy, but just because people can afford them doesn't mean they don't want them at all。

"Poor quality" is sometimes used to refer to things that people don't want, but in fact, people are still willing to spend money to throw them away, the best example of which is garbage.。No one will pay someone to bring more trash.。Instead, they'll pay someone else to take them。So, waste is a bad behavior。

Bad goods are not broken goods, they are just things that people usually reduce when the economy is good.。

What is the difference between inferior goods and ordinary goods?？

In microeconomic theory, there is an assumption that people only buy what they can afford。If a person's income increases, so do their budget constraints。The more money you have, the more you spend.。

For most products, buying another product will bring more happiness, but the increment will be smaller and smaller。For example, a second TV may add value to you, but increasing from one TV to two is much less than increasing from zero to one。

Extra units of consumption can even be harmful, such as eating a fourth burger and then getting sick。In these cases, the rational consumer does not make a purchase。But before buying more has negative consequences, people want more and more, they just can't afford to buy everything they want。

This is why ordinary goods have a considerable relationship with income-when you make more money, you have the ability to buy more things you want。

Poor quality goods are also what people want, but the market offers better options to meet potential demand。For example, if a person wants to eat meat, their budget may determine the type of meat they buy rather than the quantity.。

At lower income levels, burger meat may be all that people can afford。When they had more money, probably instead of buying an extra pound of ground beef, they bought steak。If so, we would say that ground beef is an inferior commodity because people stop buying ground beef as their income increases。

What is the difference between inferior goods and luxury goods?？

Luxury goods are almost the opposite of inferior goods.。Luxury goods are things that are bought only after basic needs have been met - such as holidays, art, wine and jewelry。Conversely, inferior goods are those that are bought only to meet basic needs。

In short, when the situation is good, will buy less inferior goods, buy more luxury goods。When money is tight, luxury goods are cut from the budget while increasing the number of purchases of inferior goods。

poor qualityBusinessWhat is the difference between Geffen goods and Van Buren goods?？

Geffen goods are a subset of inferior goods。The difference, however, is what you measure。For all inferior goods, the consumption of products decreases as income increases, which is the opposite of the relationship we expect to see for normal goods。

However, there is also an inverse relationship between Giffen goods and their prices。Under normal circumstances, if the price is lower, people are willing to buy more things。Moreover, if the price of a product is raised, the sales of that product will decrease。

For Geffen goods, as prices rise, the number of purchases increases。This relationship itself violates the law of demand - most inferior goods do not violate the law of demand, while Giffen goods violate the law of demand.。

Geffen goods are a special type of inferior goods。In addition to its inverse relationship with income, it reacts differently to its own price at specific points on the demand curve。

There are no similar substitutes for Geffen goods, which requires substitution decisions to be more special than for other inferior goods.。Thus, an increase in the price of Geffen goods may force a substitution reversal, creating a special case of a violation of the law of demand。

An example of a Geffen commodity is potatoes。Potatoes are an inferior commodity, so as income increases, the demand for potatoes tends to decrease。But there are no cheap, comparable alternatives to potatoes.。So if the price of potatoes goes up, cash-strapped consumers may end up giving up more expensive things (like hamburgers or steaks) to buy more potatoes。

Another commodity also exhibits a price-quantity violation of the law of demand, and they are called Vibron commodities.。For these special products, higher prices will also lead to higher sales。However, Van Buren's goods tend to be luxury goods rather than inferior goods, such as art.。

If it was priced at $500, people might just pass by the painting。But if the list price is $50,000, collectors may suddenly become more interested.。This reaction is the opposite of what is expected from the law of demand because people mistake high prices for indicators of real value。

What is good elasticity？

Elasticity is a measure of how well a change in one variable causes another variable to react, and the most common discussion is price elasticity of demand, because the law of supply and demand refers to the relationship between the price of a product and its sales volume。However, there are other ways to use the elasticity concept to view the elasticity of revenue relative to product sales。

If you were to chart how consumer behavior changes in terms of income and consumption, you would see a visual representation of this relationship。

For ordinary goods, the number of products purchased increases as income increases, while inferior goods have a negative slope and demand for products decreases as income increases。

To calculate the demand-income elasticity, you divide the change in income by the change in purchases。

The formula for income elasticity is: volume change% / income change% = income elasticity

For example, suppose a 5% raise increases your income from $50,000 to $52,500, how would you use that extra $2,500?？Maybe go out to eat a few more times a year, which means eating out is a common commodity (and maybe even a luxury)。

But eating out means you buy fewer groceries。Suppose you buy corned beef every year from 30 cans to 27 cans, that is, a percentage change of -10%。

Therefore, your corned beef income elasticity is -2 (-10% / 5%)。Since corned beef is an inferior commodity, its income elasticity is negative; if it is an ordinary commodity, it will have a positive elasticity。