Types of Goods in Economics

Study Notes

Normal Goods: Demand increases as consumer income rises. Examples include clothes, electronics, and dining out.
Inferior Goods: Demand decreases as consumer income rises. Examples include generic brands and public transportation.
Luxury Goods: Demand increases more than proportionally as income rises. Examples include designer clothing, high-end cars, and luxury vacations.
Necessity Goods: Essential goods with demand that does not change significantly with income changes. Examples include basic food items, water, and housing.
Substitute Goods: Can be used in place of each other. Examples include butter and margarine, tea and coffee.
Complementary Goods: Often used together. Examples include printers and ink cartridges, cars and gasoline.
Public Goods: Non-excludable and non-rivalrous, meaning anyone can use them without reducing availability to others. Examples include national defense, public parks, and street lighting.
Private Goods: Excludable and rivalrous, meaning consumption by one person prevents others from consuming it. Examples include food, clothing, and cars.

The point where the supply of a good matches demand.
The equilibrium price is where the supply and demand curves intersect, indicating the quantity supplied equals the quantity demanded.

Change in Quantity Demanded: Movement along the demand curve due to a change in the good's price.
Change in Demand: Shift of the demand curve caused by factors other than price, such as consumer preferences, income, or prices of related goods.

Price Elasticity of Demand (PED): Measures how much the quantity demanded responds to a change in price. Calculated as:
- PED = (% change in quantity demanded) / (% change in price)
Other forms of elasticity include income elasticity of demand and cross-price elasticity of demand.

Price Elasticity of Demand: Measures how much demand changes in response to a price change.
Income Elasticity of Demand: Measures how much demand reacts to a change in consumer income.
Cross-Price Elasticity of Demand: Measures how much demand for one good changes due to a price change in another good.

The fundamental economic problem of having limited resources to meet unlimited wants and needs.
Forces individuals and societies to make choices about how to allocate resources efficiently.

Economics: The study of how individuals, businesses, and governments make choices when faced with limited resources.
Microeconomics: A branch of economics that focuses on the behavior and decision-making of individual units like households and firms.

The total quantity of a good or service that all consumers in a market are willing and able to purchase at different prices.
Derived by summing the individual demands of all consumers in a market.