Understanding Types of Goods and Demand in Economics
Explore the concepts of normal versus inferior goods, the law of demand, and graphing demand curves in economics. Learn how income changes affect consumer behavior with examples of goods and services. Understand how to identify normal and inferior goods based on consumer preferences and income levels.
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Agenda Agenda - Bellringer Bellringer Types of Goods notes Types of Goods notes Demand activity Demand activity Graphing demand Graphing demand - - -
Objective Objective Students will identify the Students will identify the law of demand and how to law of demand and how to graph a demand curve by graph a demand curve by completing a worksheet completing a worksheet
Normal versus Normal versus inferior goods inferior goods
Normal good Normal good: When income goes up the : When income goes up the quantity demanded increases with income; quantity demanded increases with income; Inferior good Inferior good: When income goes down the : When income goes down the quantity demanded decreases with income; quantity demanded decreases with income;
Normal good Examples: Normal good Examples: New clothes New clothes New car New car Movie theater tickets Movie theater tickets Meals at a nice restaurant Meals at a nice restaurant Caribbean vacations Caribbean vacations NFL football games NFL football games Starbucks Starbucks **When things are good, what do you splurge **When things are good, what do you splurge on?** on?**
Inferior good Examples: Inferior good Examples: DVD rentals DVD rentals Used clothes Used clothes Used cars Used cars Public transportation Public transportation McDonalds McDonalds Coffee at home Coffee at home **When times are tough, what do you cut **When times are tough, what do you cut back on?** back on?**
As income decreases, more people use public transportation Public Luxury cars or new cars (purchased) Transportation (bus) As income goes up, more people buy new cars or luxury cars ..
As income decreases, more people eat Ramen noodles Dinner at Number 5 Ramen noodles As income goes up, more people go out to eat at nice places ..
Substitute goods Substitute goods: an increase in the price of : an increase in the price of one product leads to an increase in the one product leads to an increase in the quantity demanded of a cheaper, similar quantity demanded of a cheaper, similar product product Complementary goods Complementary goods: A decrease in the price : A decrease in the price of one leads to an increase in the quantity of one leads to an increase in the quantity demanded of the demanded of the other. other.
substitute good Examples: substitute good Examples: Tea (for coffee) Tea (for coffee) Ford (for Toyota) Ford (for Toyota) Gap (for Abercrombie) Gap (for Abercrombie) Skippy peanut butter (instead of Jiff) Skippy peanut butter (instead of Jiff) Underarmour Underarmour ( (Northface Northface) ) Pepsi (coke) Pepsi (coke) **This is why companies offer coupons/sale **This is why companies offer coupons/sale prices!! Increase demand over competition!** prices!! Increase demand over competition!**
Complementary good Examples: Complementary good Examples: Hot dogs and buns Hot dogs and buns Pencils and erasers Pencils and erasers DVD players and DVDS DVD players and DVDS Toothbrushes and toothpaste Toothbrushes and toothpaste Printers and toner cartridges Printers and toner cartridges **One is not good without the other. If there s **One is not good without the other. If there s a sale on hot dogs, people will automatically a sale on hot dogs, people will automatically demand buns** demand buns**
