For a student of economics, one of the first concepts we learn about is the different types of goods. That is a normal good, a luxury good, and an inferior good.
By normal, we don’t simply mean that it looks and acts the way it should, and is therefore not ‘abnormal’. Similarly, an inferior good is not as simple as a good which is worse than another one. For these definitions, and most in the field of economics, forget about the usual English lexicon, because economics is like a language of its own.
These types of goods are actually named so because of the relationship between demand for the product, and the income of consumers. When a consumer’s income rises, by any amount, we would expect them to demand more of a good. This is what we would ‘normally’ expect, hence why we refer to any good like this as a normal good. A classic example would be a very average car, something that gets you from A to B without any thrills, a Ford, or a Vauxhall perhaps.
Now take a Ferrari. Is it normal? Absolutely not! Economically speaking though, it is still ‘normal’ in that demand will increase as incomes rises, but we have another name for it: a luxury good. These are usually more expensive and lavish purchases, things which you could easily live without. For a luxury good, when income rises, there is an even larger percentage increase in demand.
Our final type of good, and providing the context for this article, is an inferior good. This is a good for which demand will fall when income increases, and rise when income falls. Any student of economics who has studied for more than a few weeks will probably have learnt about inferior goods, and subsequently been given ramen (instant noodles) as an example.
The classic example of America’s favourite stay-at-home fast-food, has been persistently labelled as an inferior good by economics teachers for decades. Finally, the day has come where ramen, the king of all inferior goods, is indeed, as predicted, being inferior!
As the deadly coronavirus continues to spread around the world, crippling economies and forcing employers to lay-off workers in the millions, American consumers are looking to ramen to get them through this period of uncertainty. In a recent report released by Walmart, demand for ramen increased by 578% between February 23rdand March 21st.
Whilst it is likely that people are also stocking up as more and more cities in the US go into virtual lockdown, there is surely a strong causal relationship between the soaring demand for ramen and record rates of unemployment claims and declining income across the country. As an economics teacher, who has used ramen as an inferior good for years with no evidence to back it up, I certainly hope there is any way!
THINK LIKE AN ECONOMIST!
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