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Normal inferior and Giffen goods (PowerPoint)

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					Normal, inferior, Veblen and
       Giffen goods

         Economics
Chocolate
               Chocolate
As the UK's National Chocolate Week
commences (11 - 17 October), latest research
from Mintel reveals that despite cutbacks in
other areas, chocolate sales are staying sweet -
with UK sales of chocolate confectionery
increasing by 9.2% between 2007 and 2009 to
reach an estimated £3.6 billion and sales
projected to grow even further to £4.1 billion by
2015. This is despite a fall in real incomes of
between 3 and 5%.
             Chocolate
"Chocolate rode out the recession, with
consumers turning to it as a low cost
comfort food. And the good news for
National Chocolate Week is that the
chocolate confectionery market is
continuing to see growth, as UK
consumers remain a nation of chocolate
lovers.
       Chocolate question
Using the information provided, and your
own knowledge, discuss whether
chocolate is an inferior good. (January
2011 Unit 1 exam).
Chocolate
Demand curves
        This is your old,
        reliable demand
        curve. High price, low
        demand. Economists
        would describe this as
        a negative curve.
What type of goods have a positive
              slope?
Giffen goods
 Substitution Effect and Income
              Effect
Substitution Effect, when something
becomes more expensive – you demand
less.
Income effect – when something becomes
more expensive, you are poorer in real
terms. If it is an inferior good, the income
effect will make you demand more. For
Giffen Goods, the income effect outweighs
the substitution effect.
    Giffen goods in real life
They exist in economic theory, but very
hard to find in real life. During times of
near famine in Russian history, it has been
suggested that bread could be a Giffen
Good. Best example is of Asian factory
workers buying rice and chicken for lunch.
Giffen Goods
Price goes up – demand goes up
Giffen goods
Veblen goods
Speculative goods
Quality goods – people judge goods by
their price. Are you going to buy the
cheapest bottle of wine when you are
visiting your friend`s house?
Veblen Goods
How much do you think this
      handbag is?
Veblen Goods
Thorstein Veblen
        Thorstein Veblen
Veblen goods are named after him, he
was a critic of capitalism and
consumerism.
Affluenza is a term associated with people
buying more and more for their social
image.
Affluence + Influenza
Price goes up – demand goes up
Giffen goods
Veblen goods
Speculative goods
Quality goods – people judge goods by
their price. Are you going to buy the
cheapest bottle of wine when you are
visiting your friend`s house?

				
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posted:12/3/2011
language:English
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