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And finance Allah shmoop What are superior and inferior goods

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All right Well in casual conversation you might say that

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Reese is is a superior candy bar Teo the Baby

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Ruth Or that broccoli is an inferior vegetable Teo pretty

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much every other one in economic superior and inferior goods

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

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are actually a subtype of normal goods Well normal goods

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or goods whose demand goes up when incomes go up

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Yeah like normal normal goods in L A include air

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conditioners and kombucha and designer clothes Normal goods in New

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York City include flannel button ups noise cancelling headphones and

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of course pizza The more money people make the more

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

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while normal goods have a positive income Elasticity of demand

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elasticity measures how sensitive we are two goods when they

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change in price or when our buying power changes The

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more elastic something is the more sensitive we are to

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it The more any elastic something is the less sensitive

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we are to it Well normal goods have a positive

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elasticity of demand meaning will want more normal goods as

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our buying power rises Superior goods or luxury goods are

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a type of normal Good superior goods like normal goods

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

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So what makes a superior good a superior good Well

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

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

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Superior goods are just extreme versions of normal goods The

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increase in demand for superior goods is greater than for

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normal goods given a certain percent increase in income When

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people are rolling in dough they have more money to

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play with making their demand more any elastic They have

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so much money that the basics are covered so they

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can spend a higher proportion of their income on luxurious

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things Superior goods are things like fancy TVs fancy cars

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fancy clothes basically anything fancy Okay so we have the

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normal goods Remember which have a positive income elasticity of

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demand and superior goods also known as luxury goods which

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are extreme normal goods with an incoming last the city

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over one We also have inferior goods which is the

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gin in the yang of normal goods while normal goods

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have a positive income Elasticity of demand in cheerier goods

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have a negative income Elasticity of demand will What is

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all this means means inferior goods are things people want

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

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

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

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

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you might switch from riding the boss to driving a

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car Another substitution of an inferior good for a normal

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

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

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inferior goods all together like they were never a part

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

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for inferior and superior goods For instance if you find

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yourself in your corner office overlooking the city missing the

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good old days when you had duct tape shoes and

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

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that right Like you Khun by this superstar taped sneaker

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a superior good at five hundred thirty dollars and then

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

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

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