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Income impacts: normal and inferior goods

31 December, 2015 - 15:47

We know from Measures of response: elasticities that the quantity demanded of a normal good increases in response to an income increase, whereas the quantity demanded of an inferior good declines. Clearly, both jazz and boarding are normal goods, as illustrated in Figure 6.10, because more of each one is demanded in response to the income increase from I_0 to I_1. It would challenge the imagination to think that either of these goods might be inferior. But if J were to denote junky (inferior) goods, and S super goods, we could envisage an equilibrium E_1 to the northwest of E_0 in response to an income increase, along the constraint I_1; less J and more S would be consumed in response to the income increase.