Superior good
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Superior goods make up a larger proportion of consumption as income rises, and as such 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. If the price of the good declines, consumers will purchase less of the good.[1][2]
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, 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.
[edit] 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.[3] If the quantity of an item demanded increases with income, but is not enough to increase the share of the budget spent on it, then it is a normal good.
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.[4]
[edit] See also
- Necessity Good
[edit] External links
- ^ a b Shellfish Economics A course outline for the FOA of the United Nations; Fisheries and Aquaculture Department. Retrieved April 18, 2008.
- ^ See also Behavioral Economics
- ^ [www.economist.com Economics A-Z] Even The Economist oversimplifies normal goods and inferior goods, and doesn't even mention superior goods. Retrieved from the online version of the publication at .
- ^ Asymmetrical Information A blogpost about the housing market. Retrieved April 18, 2008.
| Types of goods
public good - private good - common good - common-pool resource - club good - anti-rival goods (non-)durable good - intermediate good (producer good) - final good - capital good |
