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#cfa #cfa-level-1 #economics #microeconomics #reading-13-demand-and-supply-analysis-introduction #study-session-4
Ultimately, whether a good is called inferior or normal is simply a matter of empirical statistical analysis. And a good could be normal for one income group and inferior for another income group. (A BMW 3-series automobile might very well be normal for a moderate-income group but inferior for a high-income group of consumers. As their respective income levels rose, the moderate group might purchase more BMWs whereas the upper-income group might buy fewer 3-series as they traded up to a 5- or 7-series.)
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4.3. Income Elasticity of Demand: Normal and Inferior Goods
ts of meat. One study found that income elasticity of demand for beer is slightly negative, whereas income elasticity of demand for wine is significantly positive. An economist would therefore say that beer is inferior whereas wine is normal. <span>Ultimately, whether a good is called inferior or normal is simply a matter of empirical statistical analysis. And a good could be normal for one income group and inferior for another income group. (A BMW 3-series automobile might very well be normal for a moderate-income group but inferior for a high-income group of consumers. As their respective income levels rose, the moderate group might purchase more BMWs whereas the upper-income group might buy fewer 3-series as they traded up to a 5- or 7-series.) Clearly, for some goods and some ranges of income, consumer income might not have an impact on purchase decision at all. Hence for those goods, income elasticity of demand is zero. &#13


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