Tuesday, February 14, 2006

Demand, revisited

I'm working on getting people posting privileges - I should be able to make it so that anyone who is in the class can start a new post.

Regarding some of your comments on the questions on demand:

#3 --> If an apple can substitute for a pear (assuming it doesn't matter to you which one you eat), which is the normal good and which is the inferior?

Or, for those of you who are not "food minded", if it doesn't matter to you whether you drive a BMW or a Lexus, which is the inferior good?

The question is not asking if an inferior good CAN be a substitute for a normal good - it's asking if two normal goods CANNOT be substitutes for each other.



What does it mean to be an inferior good? What does it mean to be a normal good?

2 comments:

KM said...

If an inferior good means that you buy more when your income goes down (nothing to do with preference, really) and a normal good means you buy more when your income goes up...

Which is the BMW? Which is the Lexus? Which is the pear? Which is the apple?

KM said...

Helen has it on the nose.

They are substitutes and neither is inferior. Two normal goods may be substitutes for each other.

Remember - there is a definite definition for "normal" and "inferior". Although some of it is opinion, the difference between a BMW and a Lexus is not the difference between normal & inferior.