FACTOR 1 Income

If a consumer’s income changes, either higher or lower, that person’s ability to buy goods and services also changes. For example, Tyler works at a garden center. He uses his earnings to buy baseball cards for his collection. In the fall, people garden less and buy fewer gardening products, so Tyler works fewer hours. His smaller paycheck means that he has less money to spend, so he demands fewer baseball cards at every price.

Suppose, however, that Tyler is promoted to supervisor and receives a raise of $2 an hour. Now he has more money to spend, so his demand for baseball cards increases.

As you might guess, changes in income also affect market demand curves. When the incomes of most consumers in a market rise or fall, the total demand in that market also usually rises or falls. Increased income usually increases demand, but in some cases, it causes demand to fall. Normal goodsare goods that consumers demand more of when their incomes rise. Inferior goodsare goods that consumers demand less of when their incomes rise. Before his raise, Tyler shopped at discount stores for jeans and T-shirts. Now that he earns more, Tyler can afford to spend more on his wardrobe. As a result, he demands less discounted clothing and buys more name-brand jeans and tees.

Discounted clothing is considered an inferior good. Other products that might be considered inferior goods are used books and generic food products.

<== попередня сторінка	\|	наступна сторінка ==>
Change in Demand	\|	FACTOR 2 Market Size

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