Superior Good

Examples of Superior Good in the following topics:

• Income Elasticity of Demand

  • A positive income elasticity is associated with normal goods.
  • This is typical of a luxury or superior good.
  • This is characteristic of a necessary good.
  • These are called sticky goods.
  • This is an inferior good (all other goods are normal goods).

• Demand Function

  • These Giffen goods rarely occur.
  • An individual's demand function for a good (Good X) might be written:
  • A superior good is a special case of the normal good.
  • Goods may be related as substitutes (consumers perceive the goods as substitutes) or compliments (consumers use the goods together).
  • An increase in the price of good Z will reduce the quantity demanded for good Z.

• Reasons for Trade

  • Countries benefit when they specialize in producing goods for which they have a comparative advantage and engage in trade for other goods.
  • International trade is the exchange of capital, goods, and services across international borders or territories.
  • In other words, each nation should produce goods for which its domestic opportunity costs are lower than the domestic opportunity costs of other nations and exchange those goods for products that have higher domestic opportunity costs compared to other nations .
  • Japan may be able to produce technological goods of superior quality, but it may lack many natural resources.
  • Countries benefit from producing goods in which they have comparative advantage and trading them for goods in which other countries have the comparative advantage.

• Defining Monopoly

  • A monopoly exists when a specific person or enterprise is the only supplier of a particular good.
  • Price maker: the monopoly decides the price of the good or product being sold.
  • Single seller: in a monopoly one seller produces all of the output for a good or service.
  • Price discrimination: in a monopoly the firm can change the price and quantity of the good or service.
  • In an elastic market the firm will sell a high quantity of the good if the price is less.

• Consumer Choice and Utility

  • In Table IV.2 the preferences for two goods (good X, xebecs and good Y, yawls) is shown.
  • for each good.
  • If the marginal utility per dollar spent on good X is less that the marginal utility per dollar spent of good Y, buy good Y.
  • When EM is positive, the good is called a normal good.
  • For EM > 1 the good is considered a superior good.

• Market Power

  • It is the ability of a firm to influence the quantity or price of goods and services in a market.
  • Common barriers to entry include control of a scarce resource, increasing returns to scale, technological superiority, and government-imposed barriers.
  • Greater availability of substitute goods will weaken a firm's market power.
  • If a customer has no other place to go to obtain the goods or services, they either pay the increased price or do without.

• Market Exchange and Efficiency

  • The individuals exchange goods that are characterized by nonattenuated property rights.
  • The benefits and cost associated with the production or consumption of any good falls only on the agents engaged in the contract or transaction.
  • Therefore, any voluntary exchange must lead to Pareto superior results.
  • Voluntary markets of goods with nonattenuated property rights are consistent with the Utilitarian Ethic and Pareto Efficiency.

• Changing Worker Productivity

  • Over time, when worker productivity increases the quality and quantity of the goods and services will also increase.
  • The increase in worker efficiency is the direct result of a superior quality of manpower created through increased human capital.

• Voluntary Exchange

  • This improvement is called a Pareto improvement and the result is said to be Pareto superior to the initial alternative.
  • You might try to convince me that you liked cola to get a "better deal. " This is called "haggling or bargaining. " The negotiations for a contract often include the process of discovering the preferences and the maximum amount the other person will trade for a good, i.e.
  • The maximum price the buyer is willing and able to pay for a good is called the "reservation price of the buyer (RPB)" and the minimum price the seller will accept for the good is the "reservation price of the seller (RPS)."
  • The exchange ratio is the price of one good in terms of another.
  • The use of money results in monetary prices rather than prices in terms of other goods.

• Demand for Public Goods

  • The aggregate demand for a public good is derived differently from the aggregate demand for private goods.
  • The marginal benefit of a public good diminishes as the level of the good provided increases.
  • Public goods are non-rivalrous, so everyone can consume each unit of a public good.
  • The aggregate demand for a public good is the sum of marginal benefits to each person at each quantity of the good provided .
  • Unlike public goods, society does not have to agree on a given quantity of a private good, and any one person can consume more of the private good than another at a given price.