Different Types of Goods

Income elasticity of demand measures the responsiveness of demand to a change in income.

Inferior Good: An inferior good means an increase in income causes a fall in demand. It has a negative YED. An example, of an inferior good is Tesco value bread. When your income rises you buy less Tesco value bread and more high quality, organic bread.
Normal Good. This means an increase in income causes an increase in demand. It has a positive YED. Note a normal good can be income elastic or income inelastic.
Luxury Good. A luxury good means an increase in income causes a bigger % increase in demand. It means that the YED is greater than one. For example, high Definition TV’s would be luxury. When income rises, people spend a higher % of their income on the luxury good. (Note: a luxury good is also a normal good, but a normal good isn’t necessarily a luxury good)

Complementary Goods. Goods which are used together, e.g. TV and DVD player. see: Complementary goods
Substitute Goods. Goods which are alternatives, e.g. Pepsi and coca-cola. SeeSubstitute goods.

Giffen Good. A rare type of good, where an increase in price causes an increase in demand. The reason is that the income effect of a rise in the price causes you to buy more of this cheap good because you can’t afford more expensive goods. For example, if the price of wheat rises, a poor peasant may not be able to afford meat any more, so has to buy more wheat. See: Giffen goods

Veblen / Snob Good. A good where an increase in price encourages people to buy more of it. This is because they think more expensive goods are better. See: Veblen good

Public Goods – goods with characteristics of non-rivalry and non-excludability, e.g. national defence. See: Public goods
Merit Goods. Goods which people may underestimate benefits of. Also often has positive externalities, e.g. education. See: Merit goods
Demerit Goods. Goods where people may underestimate costs of consuming it. Often has negative externalities, e.g. smoking, drugs. See: Demerit goods

Private goods – goods which do have rivalry and excludability. The opposite of a public good See: Private goods
Free Goods – A good with no opportunity cost, e.g. breathing air. See: Free good

Economics