An inferior good will see less consumption as income rises while a normal good will see a positive relationship between more income and quantity demanded. The difference between giffen goods and inferior goods is complicated. Giffen goods have no close substitutes. On the other hand, inferior. The difference between the two is that while all giffen goods are inferior, all inferior goods are not necessarily giffen. Inferior goods ought to have a costly.
Examples[ edit ] There are many examples of inferior goods. A number of economists have suggested that shopping at large discount chains such as Walmart and rent-to-own establishments vastly represent a large percentage of goods referred to as "inferior".
Cheaper cars are examples of the inferior goods. Consumers will generally prefer cheaper cars when their income is constricted.EC1002 Chapter 2 Lesson 3 - Normal, Inferior, Giffen Goods; Complements & Substitutes [Full]
As a consumer's income increases, the demand of the cheap cars will decrease, while demand of costly cars will increase, so cheap cars are inferior goods. Inter-city bus service is also an example of an inferior good.
Difference Between Giffen Goods and Inferior Goods (with Comparison Chart) - Key Differences
This form of transportation is cheaper than air or rail travel, but is more time-consuming. When money is constricted, traveling by bus becomes more acceptable, but when money is more abundant than time, more rapid transport is preferred. In some countries with less developed or poorly maintained railways this is reversed: Certain financial services, including payday lendingare inferior goods.
- Your Answer
- Navigation menu
- Content: Giffen Goods Vs Inferior goods
Such financial services are generally marketed to persons with low incomes. People with middle or higher incomes can typically use credit cards that have better terms of payment or bank loans for higher volumes and much lower rates of interest. The concept of inferior goods is very well known to consumers and sellers, i.
Therefore, such goods have better alternatives regarding quality called as superior goods. When the income of the consumer rises, he can afford high priced article over low priced one.
Goods whose demand rises with the increase in their prices are called Giffen goods.
Inferior good - Wikipedia
Giffen goods violate the law of demand, whereas inferior goods is a part of consumer goods and services, a determinant of demand. Giffen goods have no close substitutes. On the other hand, inferior goods have alternatives of better quality. When there is a fall in price, the overall price effect in the case of Giffen goods will be negative.
As against this for inferior goods, the price effect would be positive, when there is a fall in prices.
The demand curve for Giffen goods is upward sloping, but downward sloping for inferior goods.