Name: Inferior Goods Clarification
Uploaded: 2014-10-03T22:04:48.000Z
Duration: 5 min 19 s
Description: Thousands of YouTube videos with English-Chinese subtitles! Now you can learn to understand native speakers, expand your vocabulary, and improve your pronunciation...

Past simple

I sensed some confusion coming out of the last video.

And for your good, so I thought I would do another one.

The imperative

I want to do with this is I sense that some people thought

that I was suggesting that a car in general is an inferior good,

where everyone owned a car and a car was a necessity for life,

and that is true in much of the developed world,

I was saying that the cheapest car in the market

represents the entire population in our place,

in our developed country, where everyone owns a car.

And let's say, let's represent this car with a blue.

So let's say maybe 1/3 of the people right now have that car.

Now, let's say a good chunk of the people

have this midsize sedan, this is probably the car

that most people would like to have, it's a little bit safer,

it's a little bit larger, it's a more powerful engine.

And so this is where most people are sitting.

And then you have this ultra, this kind of luxury,

you have this luxury car, Rolls Royce maybe.

So this end of the line is the poor, in our population.

and maybe we could say this is true at a particular price

on the entire curve at any given price point,

always assuming that this is the most expensive,

this is in between, and this is the least expensive.

Now, what happens if income goes up from here?

going to be able to necessarily just trade up

to this midsize sedan yet, although they maybe

or maybe they can get a nicer version of this.

But at kind of the boundary right over here,

be people who now could afford the mid-size car,

And so these people might start buying the midsize car.

And then what will happen over here, well, maybe there's

they now have the money to afford this very expensive car,

And so they also, a very small proportion, also grows there.

But the demand for this midsize car went up,

it took a much bigger chunk out of this blue

than a chunk was taken out of it by the orange,

and also the demand for this very expensive car went up.

And that was at a particular price point,

but assuming that this is the most expensive,

this is the middle, and this is the cheapest expensive,

this would be true of probably any price point.

And so we have this phenomenon that when income went up,

the quantity demanded at multiple price points

for this car-- so let me draw its actual demand curve.

So this car right over here, this is price, this over here

If its old demand curve looked something like this,

we're saying-- and maybe when we thought about this at first,

over here, we notice when income went up,

at that particular price point, the quantity

demanded went down, and that'd be true pretty much any price

point, assuming that this is always the cheapest car.

So at any price point, you would have a decrease in demand.

Remember, when we talk about a decrease in demand,

we're talking about a shift of the entire curve,

we're not talking about just one particular quantity.

Now, there's another interesting question that was asked,

and I think it was a very nice and subtle thing

I keep drawing these shifting demand curves,

and if at least I understand the question properly,

when it shifts, does it necessarily shift perfectly

Does it shift more at one price point or another?

it would probably shift a little bit different.

But anyway, going back to this, so we see this cheap car right

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Inferior Goods Clarification

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