Types of goods

Normal goods - the quantity demanded of such commodities increases as the consumer’s income increases and decreases as the consumer’s income decreases. Such goods are called normal goods.

Giffen goods - a Giffen good is an inferior good which people consume more of as price rises, violating the law of demand.. In the Giffen good situation, cheaper close substitutes are not available. Because of the lack of substitutes, the income effect dominates, leading people to buy more of the good, even as its price rises.

Substitutes goods- substitute good for another kind insofar as the two kinds of goods can be consumed or used in place of one another in at least some of their possible usesn increase in price for one kind of good (ceteris paribus) will result in an increase in demand for its substitute goods, and a decrease in price (ceteris paribus, again) will result in a decrease in demand for its substitutes.

Complementary goods - A complementary good or complement good in economics is a good which is consumed with another good;if goods A and B were complements, more of good A being bought would result in more of good B also being bought and vice versa eg car and Petrol. If the demand for car increases then the demand for petrol also increases.

1 comment:

AlwaysLearningTeacher said...

great exposition especially for a Giffen good.