Demand is the desire to own anything, and the capability to own for this. Demand is the relationship between two variables. The purchase price and the quantity demanded.
The Law of Demand States That as the price tag on the goods & services increases consumer demand for the products & services decreases & vice versa.
Law Of Demand
Let's take an example of pizza, the consumers of the pizza increases as the price tag on the pizza decreases same as the consumers of the pizza decreases as the price of pizza increases, this follows the law of Demand.
Let's take another exemplory case of butter when the price tag on the butter gets increases consumers switched to its substitute margarine, means when the price of the Products started increasing consumers started moving towards the substitute of the merchandise.
INFERIOR GOODS:
Inferior goods are those goods whose demands decrease when the income of the consumer increases and vice versa. Inferior goods are unlike normal goods which can be opposite in nature, Normal goods are those whose demand increases when the income of the consumers increases and vice versa.
An example of inferior good is old car, consumers will generally prefer old cars when their income is limited. As the income of the consumers increases the demand for the old cars will decrease while the demand for the costly car increases so the cheaper cars will be the inferior goods.
Bus services is also an example of the inferior good, this form of transportation is cheaper then air and train transportation. If the income of the consumers is bound then travelling by bus is more acceptable while it is additional time consuming however when money is more abundant then time then faster transport will be choosen by the consumer.
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Good Y is a standard good since the amount purchase increases from Y1 to Y2 as the budget constraint shifts from BC1 to the higher income BC2. Good X is an inferior good because the amount bought decreases from X! to X2 as income decreases.
Giffen Goods:
Giffen good is one which people consumes more of as their price rises. in giffen good situation income effects dominate, leading visitors to buy more of the goods even while its price rises. As popular price and quantity demanded pull in opposite direction, if price goes up, then quantity demanded goes down, or vice versa. Giffen goods are an exception to the, their price elasticity of demand is positive, when price goes up, the quantity demanded also rises and vice versa. In order to be a genuine giffen good, price should be the only thing that changes to get a change in quantity demand.
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In the case of the Giffen product the income effect causes a fall in the number demanded. Which means that following a price fall the overall the number demanded falls. This means the demand curve is upward sloping. This is shown in the diagram above.
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TYPES OF GOODS IN ECONOMICS
All Giffen goods are inferior goods however, not all inferior goods are Giffen goods.
Giffen goods are difficult to find because a quantity of conditions must be satisfied for the associated behavior to be viewed. One reason for the difficulty in finding Giffen goods is Giffen formerly envisioned a specific situation faced by individuals in a state of poverty. Modern consumer behaviour research methods often deal in aggregates that average out income levels and are too blunt an instrument to capture these specific situations. Furthermore, complicating the matter are the requirements for limited availability of substitutes, in adition to that the individuals are not so poor that they can only afford the inferior good
Some types of premium goods (such as expensive French wines, or celebrity-endorsed perfumes) are sometimes claimed to be Giffen goods. It really is claimed that lowering the price of these high status goods can decrease demand because they are no longer perceived as exclusive or high status products. However, the perceived nature of such high status goods changes significantly with a substantial price drop. This disqualifies them from being considered as Giffen goods, because the Giffen goods analysis assumes that only the consumer's income or the relative price level changes, not the nature of the good itself. If a cost change modifies consumers' perception of the good, they should be analyzed as Veblen goods. Some economists question the empirical validity of the distinction between Giffen and Veblen goods, arguing that whenever there's a substantial change in the price of a good its perceived nature also changes, since price is a large part of what takes its product Nevertheless the theoretical distinction between the two types of analysis remains clear; which one of these should be employed to any actual case can be an empirical matter.
A Giffen good is one which people consume more of as price rises, violating the law of demand. In normal situations, as the price tag on such a good rises, the substitution effect causes people to purchase less of it and more of substitute goods. In the Giffen good situation, cheaper close substitutes are not available. Due to the lack of substitutes, the income effect dominates, leading people to buy more of the nice, even as its price rises.
An inferior good is an excellent that decreases popular when consumer income rises, unlike normal goods, for which the contrary is observed. Normal goods are those for which consumers' demand increases when their income increases. Inferiority, in this sense, is an observable fact associated with affordability rather than a statement about the quality of the good. As a rule, too much of a good thing is easily achieved with such goods, and since more expensive substitutes that provide more pleasure or at least variety become available, the utilization of the inferior goods diminishes.
Depending on consumer or market indifference curves, the quantity of a good bought can increase, decrease, or stay the same when income increases.
For inferior goods the demand decreases as income increases since when u get richer u go for nicer things eg tesco value tights. the poorer u are the more you did demand for it cause u can't afford anything else, whereas M&S tights would maintain higher demand with upsurge in income cause they may be nicer.
Giffen goods are exactly opposite people want more of it with higher income
Example a posh car. The richer u is the much more likely u is usually to be in a position to afford it so the higher the demand throughout the market all together.
