Economist George Stigler once wrote that, according to consumer theory, “if consumers do not buy less of a commodity when their incomes rise, they will surely buy less when the price of the commodity rises.” This is an example of normal goods and inferior goods.
Further Explanation:
Normal goods:
Normal goods refer to the types of goods, the demand for the good is increased when the income rises. When the income is increased, the demand for good rises. Now the individual buys more quantity of goods. When the income is decreased, the demand for a product fall.
Inferior goods:
Inferior goods are those type of goods, the demand for the good is decreased, when the income rises. When the income is increased, the demand for a good fall. Now the individual buys less quantity of goods. When the income is decreased, the demand for a good rise.
The consumer does not purchase less when the income rise because the purchasing power of the consumer is increased. The consumer buys less of the product, the price of the product rises.
According to the law of demand, the demand for the product is increased when the price falls and the demand for the product is decreased when the price low.
Learn more:
1. Learn more about an increase in price
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2. Learn more about goods production
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3. Learn more about GDP and taxes
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Answer details:
Grade: Middle School
Subject: Economics
Chapter: Types of good
Keywords:
Economist, George Stigler, consumer theory, commodity, product, goods, normal goods, inferior goods, the law of demand, purchasing power.
