Feb. 25 – National Chocolate Covered Nut Day
Chocolate nuts are considered normal goods because demand for them increases as incomes rise. For example, if incomes rise 33% then demand for a chocolate can be expected to rise between 0% and 33%. When it does this, the good is considered normal. For me, an example might be Reese’s Peanut Butter Cups. The more money I have, the more I want to eat them! On the other hand, if demand for a good does not increase as income increases, then it is considered an inferior good. This means that despite having more money, you want less of the good. For me, an example might be Hershey’s Kisses. As I feel wealthier, I am less inclined toward Hershey’s Kisses, and would rather choose something else. Therefore, Hershey’s Kisses are an inferior good (at least for me). There is a third option. There are some things where demand rises faster than income. In other words, at low income levels, there is little demand, but as incomes rise, demand rises faster than income. For instance, imported Belgian pralines (such as Godiva, but there are better brands out there!), are a luxury good. At low income levels, there is little demand. But as income rises, demand suddenly kicks in and grows faster than income. If this happens, the good is considered a luxury good. Lets use another example: cars. Inexpensive cars are an inferior good. As people have more money, they want less of them. This a Ford Focus. Cars like Toyota Camrys are normal goods. Demand for them follows increases in income. Lamborghinis, by contrast, are a luxury good. At low income levels, there is little demand, but at a certain income level demand suddenly takes off.
- What is a normal good?
- Why are chocolate covered nuts normal goods?
- These same concepts also work in reverse. How does the concept of inferior goods would explain the increase in sales at Walmart when the economy is doing poorly?
- Which kinds of chocolates are normal goods for you? What about inferior? Luxury?
- Box of Fruit Loops. Digital Image. Acme. February 19, 2019. https://www.orderacme.com/product/00038000391187/kelloggs-fruit-loops-cereal
- Bag of Tootie Fruities. Digital Image. Walmart. February 19, 2019. https://www.walmart.com/ip/Malt-O-Meal-Tootie-Fruities-Cereal-22-5-Oz/10292119