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Please help a layman distinguish among sorts of normal goods

Economics Asked by Michael Schwartz on October 29, 2020

I’m trying to organize my thinking about differences among types of normal goods, and I’m sure that someone smarter than me has already done the necessary work.

Here’s one sort of distinction that I have in mind:

A is willing to spend more money for a better graphics card because it improves his experience watching movies. He is not spending more money to gain any sort of competitive advantage over other users, and his streaming services never change the demands that they place on users’ computers.

B is willing to spend more money for a better graphics card because it improves his experience watching movies. He is not spending more money to gain any sort of competitive advantage over other users, but, because other users’ purchases affect what sort of demands streaming services place on users’ computers, he’s in something of an arms race.

C is willing to spend more money for a better graphics card because it confers a competitive advantage playing MMOs. He cares only about the performance of his gaming rig relative to other gaming rigs; he is otherwise indifferent to performance.

Imagine that people like A constitute the entire market for graphics cards. Separately, imagine that people like B constitute the entire market for graphics cards. Imagine that people like C constitute the entire market for graphics cards. Would graphics cards be different sorts of goods in these three scenarios?

A related question: Are there other sorts of goods than these:

  • club

  • common-pool

  • complementary

  • durable

  • excludable

  • free

  • Giffen

  • inferior

  • intangible

  • luxury

  • normal

  • nondurable

  • nonexcludable

  • nonrivalrous

  • public

  • private

  • rivalrous

  • substitute

  • superior

  • tangible

  • Veblen

One Answer

Would graphics cards be different sorts of goods in these three scenarios?

No. What we have is different sorts of consumers, with different utility functions. The good is the same, it is the demand function that changes.

In a dynamic setting of course, the preferences of consumers (and which are the predominant ones in terms of demand share) will possibly drive how graphics cards evolve as products.

As for the second question, I am pretty sure that somewhere in the vast and centuries old economics literature someone has defined yet one more subcategory of a good.

Answered by Alecos Papadopoulos on October 29, 2020

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