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The Economics of Toilet Paper

Feb. 29, 2024
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FinMeUp
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FinMeUp

Normal goods vs inferior goods in economics

What do economics and toilet paper have in common? Lets start at the beginning. I heard the terms normal goods and inferior goods for the first time way back in grade 10 economics. I remember thinking: Normal good sounds so . . . normally. Arent all goods normal

Weirdly enough, the opposite of normal goods in economics is not abnormal goods but rather inferior goods. Its all quite strange. Lets investigate.


Normal goods

The way we classify goods in economics is based on our response to them when our income changes. Thus, a normal good or an inferior good is a function of changes in consumer income.

Our demand for normal goods responds exactly as we expect it to: When our income increases, our demand for these products and services also increases, as we are now richer and can afford more. Toilet paper, flights, cars.

It sounds easy, right? At first glance, of course it does. But lets look a little deeper. What if instead of looking at our demand for toilet paper, we look at our demand for 1-ply toilet paper? 

 

Inferior goods

If we are poor, our demand for 1-ply will increase as our income increases. But what about middle and upper-class individuals? It is safe to assume that as their income increases, their demand for 1-ply toilet paper might very well decrease, and instead, their demand for 2-ply toilet paper (also referred to as white gold) is likely to increase.

Get it? Lets see if Tina and John can drive it home. Or in this case, wipe it off.

 

Normal goods vs Inferior goods

Tina gets promoted, and her demand for 1-ply toilet paper consequently increases. 1-ply toilet paper is a(n) __________ good for Tina. Easy, normal good. 

Tina gets promoted, and her demand for 1-ply toilet paper consequently decreases. 1-ply toilet paper is a(n) __________ good for Tina. Higher income, lower demand. Inferior good.


Lets take it to the next level: 

John gets demoted, and his demand for 1-ply toilet paper consequently decreases. 1-ply toilet paper is a(n) __________ good for John. Poorer John - decrease in demand. This is what we expect. Normal good.

John gets demoted, and his demand for 1-ply toilet paper consequently increases. 1-ply toilet paper is a(n) __________ good for John. John is poorer, yet his demand increases. Poor John goes back to 1-ply. Inferior good. 



 


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