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Superior goods |
Superior goods make up a larger proportion of consumption as income rises, and as such are a type of normal goods in consumer theory. Such a good must possess two economic characteristics: it must be scarce, and, along with that, it must have a high price.1 The scarcity of the good can be natural or artificial; however, the general population (i.e., consumers) must recognize the good as distinguishably better. Possession of such a good usually signifies "superiority" in resources, and usually is accompanied by prestige. If the price of the good declines, consumers will purchase less of the good.12
The income elasticity of a superior good is above one by definition, because it raises the expenditure share as income rises. A superior good also may be a luxury good that is not purchased at all below a certain level of income. Examples would include smoked salmon and caviar, and most other delicacies. On the other hand, superior goods may have a wide quality distribution, such as wine and holidays; however, though the number of such goods consumed may stay constant even with rising wealth, the level of spending will go up, to secure a better experience.
The choice of the word "superior" to define goods of this type suggests that they are the antonym of "inferior goods", but this is misleading; an inferior good can never be a superior good, but many goods are neither.3 If the quantity of an item demanded increases with income, but is not enough to increase the share of the budget spent on it, then it is a normal good.
Some texts on microeconomics use the term Superior good as the sole alternative to an inferior good, making "superior goods" and "normal goods" synonymous. Where this is done, a product making up an increasing share of spending under income increases is often called an Ultra-superior good.4
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