Question

Normal and inferior goods are differently impacted by recessions. Examples include new cars versus fast food. The textbook examples include jewelry, gourmet pet food, dollar general stores.For this assignment, research four other examples of inferior goods. In addition, discuss how revenues of inferior goods producers are expected to be affected by economic recessions and expansions.Expectations: At least three pages in length. Use a minimum of 4 references

Answer 1

The Economic Recession time was considered as the very crucial time for all developed economies and also for developing economies. The life style of the normal people was very affected very worse in recession period than other negative aspect of economic condition. In this crucial period many business ventures faced the loss of revenue is due to serious effect of low purchasing power of the people. The liquidity of the money also shrinked to the great extent. The general opinion of the economist states that the starting stage of the recession leads to the gradual decrease in the production of goods and services as well as the employment rate. In the next stage, the consumption pattern changes with the decrease in the spending activities leads to less demand for the goods which was purchased in the normal rate. The Goods that are purchased by the consumers are categorically divided into two. They are 1) Normal and 2) Inferior goods.

Normal goods refers to the goods which have high demand when the consumer has higher earnings of income. The rate of demand has direct proportion with the consumers income. More income leads to more consumption of goods which are purchased usually in order to fulfill their significant consumption needs. For eg. Purchasing houses, jewels, cars, clothes. Those highly branded goods are costly in nature than the other low branded goods with same type. The purchase of the those branded normal goods highly depends on mass income earned by the people. Consumers can afford to pay for branded goods only when if they have sufficient income to buy those things.

Let us discuss some of the four examples of Inferior goods in relation to recession effects.

1) Using public transportation:- In the recession period, due to income constraints, people wish to use public transportation rather than using their own vehicles. As they cannot able to afford for maintenance cost of vehicles. So people use cheaper source of public transportation.

2) Using Cerals items:- Some price of the basic food items will rose in the recession period, when supply of the products reduces. When supply reduces drastically price also increases accompanying with less demand. So people will prefer to buy less quality goods for example cereals products.

3) Substitution Goods:- Tea or Coffee is the complementary goods, In the recession period the producers are not in the position to predict the demand and the price behavior. When price of the Tea increases people prefers coffee products when its price are very less when it is compared with the price of the tea.

4) Giffen Goods:- The Giffent type of goods refers to the distinct character of the products, For example. Usage of Bread. The bread can also consumed by the people who have low income. The reason is that bread is the basic and cheaper source of food. Its price is not so high as the price of Pizzas. Even if the price increases in the less marginal rate, people wish to buy with higher prices.

The rate of revenues of selling inferior goods are very hampered in the economic development. The High branded products marketing will decline in the recession period due to consumers wish to buy inferior goods. The producers of the high branded products usually pays higher tax for the Government. But sellers of inferior goods pay less tax. It will hinders government best policy of investing the funds for public projects. Finally it will decline the rate of goods and services output of the superior goods in the country.