In thinking about the difference between what economists refer to as “normal” and “inferior” goods, one may be inclined to think there is a clear dichotomy between the two. Generally speaking, a good would be classified as normal when you consume more of it when your income increases. Conversely a good would be considered to be inferior when you consume less of it when your income increases. It is fairly easy to come up with goods that are generally normal or inferior. For instance, season tickets to a sports team are likely normal goods in that you are more likely to purchase them when your income is higher. Ramen noodles tend to be an inferior good – where you seem to purchase less of them as your income increases (or if you are a college student, more of them by virtue of your low income).
In a price theory course we would explore reasons why a good is normal or inferior, but that is not what I want to bring up here. What I wanted to remind folks is that thinking there is a clear distinction between what is a normal good and an inferior good is not very useful, and for two reasons.
I don’t just bring this up for economic curiosity. It is not hard to imagine that folks who wish to alter our behavior have these ideas in their heads when they are crafting social policy. I just hope they understand what they are doing.
Evidently Wintercow had a relaxing weekend.
Wintercow has dashed his and his roommates’ credibility by regarding free beer as an inferior good. It has to qualify along with ramen noodles, which my daughter introduced me to, as a basic carbohydrate.
I assume Wintercow was in a blissful, relaxed mood when he finished his post by saying that [the policy makers] know what they are doing. That is a great punchline.