Normal and Inferior Goods

How the demand for some goods could actually go down if incomes go up

Category:

Education

Tags:

• normal
• inferior
• income
• effect

[LividImp]

Q. Why do Yugos come with heated rear windows?

A. To keep your hands warm while you're pushing them.

[goldensilverstar]

An example of Inferiority: Khan Academy

An example of Normal: The shitty teachers at my school

[drahkik]

@superduc99 Just make sure to share these videos with everyone that you know. There is hope.

[joephrone]

thank 4 this



[skatedude74]

why do I even go to highschool? I could just sit at home watching these videos for 8 hours a day and then go and get a GED

[superduc99]

2,457 views in three days. About the same number of views an NBA slam dunk, lady gaga or snoop dogg vids would get in 5 minutes. We, as a generation, are doomed!

[ZacharySmith89]

@asdfgoogle But I agree that this--or the last video, in which he discussed variables assumed to be held constant--would have been a good time to introduce the concept of price perception and other irrationalities. Who knows, maybe Sal's the type of libertarian who believes in a completely rational market with perfect information, where everyone has the time to research that $500 car to ascertain its true value, without any doubt of misinformation. XD. Or maybe he'll cover it in the next vid...

[ZacharySmith89]

@asdfgoogle Okay, so I have imagined your bell shape. It was annoying because it was sideways, on the y-axis--I agree with Sal that the x-axis should have been price!--I also understood the cause of your bell shape (it would definitely be skewed right--er, up--usually?). So, I now understand where we differ: I see this video as working on the assumption of the absence of price perception for the sake of simplicity/clarity to focus on the affect of income on the demand/price for inferior goods.

[ZacharySmith89]

@asdfgoogle Just like your experience, where I live $500 cars have serious problems 90% of the time (like mine!). Because they tend to have serious problems, they are considered an "inferior good". Because they are an inferior good (with serious problems), most people would NOT buy them. We agree on this.

I'm not entirely certain why you replied in argumentative tone, because we seem to agree...um, your insistence on a "bell effect", I think, means that you have defined different parameters...

[asdfgoogle]

@ZacharySmith89 Actually the reality is that most people would NOT buy a $500 car, because 90% of the time, a $500 car is has serious mechanical or some other problems.

For instance, I sold one of my cars a year ago to a mechanic for $450, because the engine required more work that what it was worth to someone who couldn't fix it himself. The only other offers I got were just a few hundred $ from people that were just going to part it out or take it to the junk yard.

[ZacharySmith89]

@asdfgoogle With all due respect, he implied what you said. He said that the Yugo was an example of an "inferior good", which means that people would purchase it only if they could not afford something better: a "normal good".

So, people would question, "A $500 car? Yeah right. What's wrong with it?" but would still buy it if they couldn't afford better. However, if their income went up, per Khan's example, then more people could buy better cars, decreasing the demand/price for Yugos.

[asdfgoogle]

Both purchases, assuming they are in well working order, they won't move predicably in one direction. They will actually in reality have a "bell effect" if you will. There is an expected price point for most products/good, and as a product moves away from that expected price, people become cautious of the "too good to be true" mentality and sales will fall.

For instance, would you buy a $100 laptop or a $500 car? Yeah right. What's wrong with it? lol.

Just something you should have mentioned.