Superior goods are characterized by the fact that demand does not decrease when the price increases. Goods that fall into this category are more in demand by consumers if they have a higher income. That is why one often recognizes superior goods when the economic situation of an entire economy improves. The counterpart to the superior goods are the inferior goods.
Superior goods: Classification of goods according to income elasticity
This lesson covers superior goods. You will find out what superior goods are and what significance they have. The division of goods will be presented to you. Then we explain how superior goods are differentiated from inferior goods. To deepen your knowledge, you can answer a few exercise questions after the text.
English: superior goods
What is the status of superior goods?
According to gradinmath.com, superior goods have a special meaning for prosperity. It is a matter of economic goods that one does not afford on a daily basis.
But if income rises, these goods will be specifically demanded. Superior goods are not necessarily luxury goods. Households that buy these goods without paying attention to the price want to treat themselves to something.
What are superior goods?
Goods can be divided into the following different types :
- Material and immaterial goods
- Consumer goods and durables
- Heterogeneous and homogeneous goods
- Consumer goods and capital goods
Another classification of the consumer sees a division into superior and inferior goods before:
- There is greater demand for superior goods when the price of these goods is increased. The decisive factor is that the consumer’s disposable income increases.
- This is different for inferior goods. A characteristic of inferior goods is the decreasing demand as soon as the consumer’s disposable income increases. The buyers replace the inferior goods with superior goods. Inferior goods are not necessarily products of poor quality. The falling demand is based solely on the subjective assessment of consumers.
Example for the delimitation of superior and inferior goods
The fashion designer “Sarah C.” has launched a collection of lace underwear on the market. It sells the goods that are particularly popular with high-income households at a high price. The expensive selling price does not affect the sale. In addition to this collection, the fashion designers also offer cotton underwear. These are in particular demand from low-income households.
The collection with lacy underwear is superior goods. Cotton underwear is in demand from low-income households. An increase in prices would have a negative effect on the development of demand.