Tradable Goods

And finance Allah shmoop What are superior and inferior goods

All right Well in casual conversation you might say that

Reese is is a superior candy bar Teo the Baby

Ruth Or that broccoli is an inferior vegetable Teo pretty

much every other one in economic superior and inferior goods

aren't union yang Superior goods also known as luxury goods

are actually a subtype of normal goods Well normal goods

or goods whose demand goes up when incomes go up

Yeah like normal normal goods in L A include air

conditioners and kombucha and designer clothes Normal goods in New

York City include flannel button ups noise cancelling headphones and

of course pizza The more money people make the more

they'LL be spending on these goods if they're getting technical

while normal goods have a positive income Elasticity of demand

elasticity measures how sensitive we are two goods when they

change in price or when our buying power changes The

more elastic something is the more sensitive we are to

it The more any elastic something is the less sensitive

we are to it Well normal goods have a positive

elasticity of demand meaning will want more normal goods as

our buying power rises Superior goods or luxury goods are

a type of normal Good superior goods like normal goods

have an incoming elasticity of demand that's greater than zero

So what makes a superior good a superior good Well

a superior good has an income elasticity of demand That's

not on ly greater than zero It's greater than one

Superior goods are just extreme versions of normal goods The

increase in demand for superior goods is greater than for

normal goods given a certain percent increase in income When

people are rolling in dough they have more money to

play with making their demand more any elastic They have

so much money that the basics are covered so they

can spend a higher proportion of their income on luxurious

things Superior goods are things like fancy TVs fancy cars

fancy clothes basically anything fancy Okay so we have the

normal goods Remember which have a positive income elasticity of

demand and superior goods also known as luxury goods which

are extreme normal goods with an incoming last the city

over one We also have inferior goods which is the

gin in the yang of normal goods while normal goods

have a positive income Elasticity of demand in cheerier goods

have a negative income Elasticity of demand will What is

all this means means inferior goods are things people want

less of as their income arises as people's buying power

increases well they'LL usually start substituting inferior goods for normal

ones As you start making more money while you'LL probably

swap your inferior McDonald's coffee for Starbucks a normal good

you might switch from riding the boss to driving a

car Another substitution of an inferior good for a normal

good The more money you make the last you'LL demand

inferior goods As you climb the corporate ladder you'LL forget

inferior goods all together like they were never a part

of your life But don't worry There's a horseshoe theory

for inferior and superior goods For instance if you find

yourself in your corner office overlooking the city missing the

good old days when you had duct tape shoes and

inferior good very inferior Good There's a superior good for

that right Like you Khun by this superstar taped sneaker

a superior good at five hundred thirty dollars and then

reminisce about well the old inferior good days Yeah there's

a luxury market for everything nowadays Yeah you've seen it