This presentation mainly focuses on Substitute Goods, other types of goods are also explained in this ppt like inferior goods or luxury goods etc...

1. PRESENTATION
ON SUBSTITUTE
GOODS

2. INFERIOR NORMAL LUXURY
COMPLEMENTARY
SUBSTITUTEGIFFEN
SNOB
GOODS

3. INFERIOR GOODS
•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.

4. NORMAL GOODS
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.

5. LUXURY GOODS
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.

6. COMPLEMENTARY
GOODS
Goods which are used together,
e.g. TV and DVD player.

7. GIFFEN GOODS
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.

8. SNOB GOODS
A good where an increase in price
encourages people to buy more of it.
This is because they think more
expensive goods are better.

9. SUBSTITUTE GOODS
Goods which are alternatives, e.g. Pepsi
and Coca - cola.

10. Definition of the Substitute
Goods
 Substitute goods are those goods which can be
used in place of one another for satisfaction of a
particular want.
 A good or service that may be used in place of
another.
 Lets see an example :

11. For example, if price of a substitute good
(say, coffee) increases, then demand for
given commodity (say, tea) will rise as tea
will become relatively cheaper in
comparison to coffee. Let us clear this with
the help of Fig.
FIG.

12. Price relationshiP oF
substitute goods
 When two goods are a pair of substitute
goods, the price of one good is
proportional to the demand of the other
good. In other words, when the price of
one good increases, then the demand of
the other good also increases and vise
versa, because consumers want to buy
cheaper goods.
 The closer the characteristics of the
substitute goods, the bigger the change
in demand of one good will occur when
the price change of the other good
occurs.

13. Graph1 – Increase in price of
good A

14. Graph 2 – Increase in demand of
good B

15. tyPes oF substitute goods:
close substitutes are those goods that
could closely take the place of a particular good.
There are many substitute goods available
on the market.
A PerFect substitute is a good that
functions just the same as the good it is
being compared to. A Perfect substitute is a
product or service you can purchase in
place of another and still get the same
satisfaction. An example would be Coke or
Pepsi.

16. EFFECTS

17. THANKS FOR WATCHING
Himanshu Verma
BBA(M1)
Roll no: 23