Wednesday

 

Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed.
PART 7 Topics for Further Study
Chapter 21 of 36 The Theory of Consumer Choice
Section 13 of 26
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Figure 8 – An Inferior Good
A good is an inferior good if the consumer buys less of it when his income rises.
Here Pepsi is an inferior good.
When the consumer's income increases the budget constraint shifts outward.
The consumer buys more pizza but less Pepsi.
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If a consumer buys less of a good when his income rises, economists call it an inferior good.
Figure 8 shows a situation where pizza is a normal good and Pepsi is an inferior good.
An increase in income, indicated by the rightward move of the budget constraint induces the consumer to buy more pizza but less Pepsi, indicated by the new optimum.
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Most goods are normal goods, as is pizza here, people want more as their incomes increase.
One example of an inferior good is bus rides.
As income increases consumers are more likely to own cars or take a taxi and less likely to ride a bus.
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the initial optimum and the new optimum
tōsho saiteki ten to shin saiteki ten
当初最適点と 新最適点