World Library  
Flag as Inappropriate
Email this Article

Superior good

Article Id: WHEBN0001845001
Reproduction Date:

Title: Superior good  
Author: World Heritage Encyclopedia
Language: English
Subject: Inferior good, Normal good, Income elasticity of demand, Types of goods, Necessity good
Collection: Goods
Publisher: World Heritage Encyclopedia

Superior good

Seven different types of caviar. Total Demand for this seafood is a convex function of household income, making it a superior good.[1]

Superior goods make up a larger proportion of consumption as income rises, and therefore are a type of normal goods in consumer theory. Such a good must possess two economic characteristics: it must be scarce, and, along with that, it must have a high price.[1] The scarcity of the good can be natural or artificial; however, the general population (i.e., consumers) must recognize the good as distinguishably better. Possession of such a good usually signifies "superiority" in resources, and usually is accompanied by prestige.

The prestige-value of some superior goods is so high that a price decline would lower demand; these are the fabled Veblen goods.

The income elasticity of a superior good is above one by definition, because it raises the expenditure share as income rises. A superior good also may be a luxury good that is not purchased at all below a certain level of income. Examples would include smoked salmon and caviar,[1] and most other delicacies. On the other hand, superior goods may have a wide quality distribution, such as wine and holidays; however, though the number of such goods consumed may stay constant even with rising wealth, the level of spending will go up, to secure a better experience.

Confusion with normal goods

The choice of the word "superior" to define goods of this type suggests that they are the antonym of "inferior goods", but this is misleading; an inferior good can never be a superior good, but many goods are neither superior nor inferior. If the quantity of an item demanded increases with income, but not by enough to increase the share of the budget spent on it, then it is only a normal good and is not a superior good.

Consumption of all normal goods increases as income increases. For example, if income increases by 50%, then consumption will increase (maybe by only 1%, maybe by 40%, maybe by 70%). A superior good is a normal good for which the proportional consumption increase exceeds the proportional income increase. So, if income increases by 50% then consumption of a superior good will increase by more than 50% (maybe 51%, maybe 70%).

In economics terminology, all goods with an Income elasticity of demand greater than zero are "normal", but only the subset having income elasticity of demand > 1 are "superior".[2]

Some texts on microeconomics use the term Superior good as the sole alternative to an inferior good, making "superior goods" and "normal goods" synonymous. Where this is done, a product making up an increasing share of spending under income increases is often called an Ultra-superior good.

See also

External links

  1. ^ a b c Shellfish Economics A course outline for the FAO of the United Nations; Fisheries and Aquaculture Department. Retrieved April 18, 2008.
  2. ^ "superior good". Retrieved 2011-09-22. 
This article was sourced from Creative Commons Attribution-ShareAlike License; additional terms may apply. World Heritage Encyclopedia content is assembled from numerous content providers, Open Access Publishing, and in compliance with The Fair Access to Science and Technology Research Act (FASTR), Wikimedia Foundation, Inc., Public Library of Science, The Encyclopedia of Life, Open Book Publishers (OBP), PubMed, U.S. National Library of Medicine, National Center for Biotechnology Information, U.S. National Library of Medicine, National Institutes of Health (NIH), U.S. Department of Health & Human Services, and, which sources content from all federal, state, local, tribal, and territorial government publication portals (.gov, .mil, .edu). Funding for and content contributors is made possible from the U.S. Congress, E-Government Act of 2002.
Crowd sourced content that is contributed to World Heritage Encyclopedia is peer reviewed and edited by our editorial staff to ensure quality scholarly research articles.
By using this site, you agree to the Terms of Use and Privacy Policy. World Heritage Encyclopedia™ is a registered trademark of the World Public Library Association, a non-profit organization.

Copyright © World Library Foundation. All rights reserved. eBooks from World eBook Library are sponsored by the World Library Foundation,
a 501c(4) Member's Support Non-Profit Organization, and is NOT affiliated with any governmental agency or department.