Ordinary good

An ordinary good is a microeconomic concept used in consumer theory. It is defined as a good which creates increased demand when the price for the good drops or conversely decreased demand if the price for the good increases, ceteris paribus. It is the opposite of a Giffen good.

Since the existence of Giffen goods outside the realm of economic theory is still contested, the pairing of Giffen goods with ordinary goods has gotten less traction in economics textbooks than the pairing normal good/inferior good used to distinguish responses to income changes. The usage of "ordinary good" is still useful since it allows a simple representation of price and income changes. A normal good is always ordinary, while an ordinary good can be either normal or inferior.

Distinction between income and price effects

Income change   Price change
  Normal good Inferior good   Ordinary good Giffen good
Income up Consumption up Consumption down Price up Consumption down Consumption up
Income down Consumption down Consumption up Price down Consumption up Consumption down

See also

References

  • Hal Varian, Intermediate Microeconomics: A Modern Approach, Sixth Edition, chapter 6



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