Types of Goods

• Free good

  • A free good is a good that we do not pay for. In other words, it is a zero-priced good

  (e.g., air, sunlight)
• Economic Good

  • This is a good for which we must pay a price.
• Normal good

  • A normal good means an increase in income causes an increase in demand for the

  good because you have more money available to spend.
• Luxury good

  • A luxury good means an increase in income causes a bigger percentage increase in

  demand for the good. (e.g., a Rolls Royce is a luxury good because when income

  rises, people spend a higher portion of their income on this car).
• Inferior good

  • An inferior good is a good whose demand falls when income increases. (An example of an inferior good is chicken parts. When your income rises people buy less chicken parts and buy better quality meat items.)
• Giffen good.

  • This is a type of inferior good whose demand increases when the price increases. This occurs because there are hardly any substitutes for inferior goods.
• Substitute goods

  • These are goods which are alternatives to each other (e.g., Pepsi and Coca-Cola).
• Complementary goods

  • These are goods which are used together (e.g., bread and butter; chicken and fries)
• Economic bad

  • Anything that has a negative effect on the consumer’s level of satisfaction (e.g., pollution, smoking, traffic congestion)