Inferior good

In economics, and specifically in microeconomics, an inferior good is a class of goods that is differentiated from others by the fact that demand for them changes in a specific way after a change in the consumer's income. Their specific distinguishing feature is controversial in the literature.

definition

This article is based on the following - probably the most common - definition of an inferior good:

Definition: A good is referred to as inferior if its demand (absolute) decreases with increasing income. It is called normal , if demand increases (absolute).

Different definitions

Some of the literature makes other distinctions in deviation from the above definition. A few different approaches are outlined below:

version 1

A good is referred to as a relatively inferior good (also: normal good ) if the demand increases only disproportionately with increasing income. Is called a Good as superiores Well , if demand increases as income rises disproportionately. A good is called an absolutely inferior good if the demand decreases absolutely with increasing income.

Variant 2

A good is referred to as a normal good if the demand increases only disproportionately with increasing income. A good is called a superior good if demand increases disproportionately with increasing income. A good is called an inferior good if the demand decreases in absolute terms with increasing income.

Variation 3

A good is referred to as a normal good if the demand increases only disproportionately with increasing income. A good is referred to as a luxury good if the demand increases disproportionately with increasing income. A good is called a superior good if it is either a normal or a luxury good. A good is called an inferior good if the demand decreases in absolute terms with increasing income.

properties

Adding the definition of income elasticity , a good is inferior if and only if the income elasticity is negative.

It should be noted that the characterization of a good as inferior or normal is not firmly linked to a good, but always depends on the external circumstances (absolute income level, prices, preferences). The same good can therefore easily represent a normal good with a low income, but turn into an inferior good above a certain income level.

example

• With an income of 1000 euros, simple supermarket bread is consumed for 10 euros per month. After the income has risen to 2,000 euros, people buy more bread from the bakery across the street and the consumption of supermarket bread drops to 3 euros. In this example, supermarket bread is an inferior good.
• With an income of 1000 euros, 30 euros per month are spent on cinema tickets. After the income has risen to 2000 euros, the expenses for cinema tickets rise to 45 euros. So income has risen and spending on going to the cinema has also increased. The cinema aisles are a normal good in this example .

Examples of inferior goods

Certain financial services, such as B. Short Term Loans . Such financial services are specially designed for the low-income market . People in the middle or upper class can usually use credit cards with better payment terms or bank loans for higher volumes and significantly lower interest rates.

literature

• Friedrich Breyer: Microeconomics. An introduction. 5th edition. Springer, Heidelberg a. a. 2011, ISBN 978-3-642-22150-7 .
• Geoffrey A. Jehle and Philip J. Reny: Advanced Microeconomic Theory. 3rd ed. Financial Times / Prentice Hall, Harlow 2011, ISBN 978-0-273-73191-7 .
• Paul Krugman and Robin Wells: Economics. Schäffer-Poeschel, Stuttgart 2010, ISBN 978-3-7910-2339-7 . [S. 153, 317 and 350.]
• N. Gregory Mankiw and Mark P. Taylor: Fundamentals of Economics. 4th edition. Translated by Adolf Wagner and Marco Herrmann. Schäffer-Poeschel, Stuttgart 2008, ISBN 978-3-7910-2787-6 .
• Andreu Mas-Colell, Michael Whinston, and Jerry Green: Microeconomic Theory. Oxford University Press, Oxford 1995, ISBN 0-195-07340-1 .
• Hal Varian : Microeconomic Analysis. WW Norton, New York and London 1992, ISBN 0-393-95735-7 .
• Hal Varian : Intermediate Microeconomics. A modern approach. 8th edition. WW Norton, New York and London 2010, ISBN 978-0-393-93424-3 .

Individual evidence

1. ↑ Cf. in particular the standard works in common use worldwide Varian 2010, p. 143 ff .; Mas-Colell / Whinston / Green 1995, p. 25 and Mankiw 2008, p. 79 f .; also, inter alia, Varian 1992, p. 117; Jehle / Reny 2011, p. 56; Breyer 2011, p. 143.
2. ↑ See Johannes Natrop: Fundamentals of Applied Microeconomics. Oldenbourg, Munich 2006, ISBN 978-3-486-71315-2 , p. 80 ff .; the same, but with renouncing the terminology of the “normal” good: Jochen Schumann, Ulrich Meyer and Wolfgang Ströbele: Fundamentals of microeconomic theory. 9th edition. Springer, Heidelberg u. a. 2011, ISBN 978-3-642-21225-3 , pp. 65 f.
3. ↑ See Michael Heine and Hansjörg Herr: Volkswirtschaftslehre. Paradigm-oriented introduction to micro- and macroeconomics. Oldenbourg, Munich 2013, ISBN 978-3-486-71523-1 , p. 40.
4. ↑ See Susanne Wied-Nebbeling and Helmut Schott: Fundamentals of Microeconomics. Springer, Heidelberg a. a. 2007, ISBN 978-3-540-73868-8 , p. 48 f.
5. ↑ Unfortunately, this is also inconsistent. It is usually defined by, cf. the article income elasticity . ${\displaystyle \eta _{i}\equiv {\frac {\partial x_{i}(\mathbf {p} ,y)}{\partial y}}{\frac {y}{x_{i}(\mathbf {p} ,y)}}}$
6. ^ Payday Lending in America: Who Borrows, Where They Borrow, and Why. (PDF) Retrieved April 19, 2019 .