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Business, Economics

How do you classify products?

There are several agreed product categories, as not all products seem to give rise to the same consumer behaviour when it comes to demand.

Normal Products

Goods/services that see a rise in their aggregate demand as incomes (this is seen to be real purchasing power) rise are seen as normal products. Family Cars would fit this category.

Inferior Products

Goods/services that see a decrease in their aggregate demand as incomes rise, are seen as inferior products. Examples of this might be junk food, because as purchasing power increases then consumers might very well decide to purchase better quality food and decrease their fast food purchases.

In this instance, there is likely to still be an overal increase in demand due to a larger positive substitution effect than negative income effect.

Giffen Products

There is a special class of inferior products, that shows increased demand as prices rise.

An example here, would be in 19th Century Ireland. When the price of potatoes rose people were unable to purchase the more expensive meat and fish and so purchased more potatoes. This is actually one of the main causes to famine and malnutrition in developing world.

So in this instance the income effect of price change far outweighs the substitution effect seen.

Veblen Products

This is the Luxury Goods classification, and shows that as price increase so does the demand. Normally there is 0 demand up to a price, and then demand increase rapidly. This is known as the ‘snob effect’.

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About loganjehall

I focus on building an internal culture focussed on listening to and working alongside customers to build value for all stakeholders. Real lasting change that understands the real needs of the customer is the only way to ensure a dynamic constant state of learning and innovation. I am a highly experienced sales, marketing and business professional with wide ranging experience in varied industries. Having worked in both B2B and B2C I understand sales and business is really about P2P (people to people) and therefore always focus on relationships and engagement. "Business is socialising with a purpose" (Gaping Void) Passion, people, vision, strategy, customers, advocates, believers, innovation, customer engagement, social, knowledge management and appropriate use of technology are vital in the attainment of business goals. I am a co-founder of Movebubble, a new technology startup in #Proptech. This blog is really here to allow me to develop my voice and ideas, and gain feedback from a wider audience than just the lecture or breakout room. Hopefully i can introduce some interesting points, and experiment with digital, marketing, engagement, social media and SEO techniques and tips i am learning on the way. I hope you enjoy my posts, please let me know what you think with some feedback.

Discussion

One thought on “How do you classify products?

  1. It was honnor to visit your site. It is very beautiful and i was to message about that. Nothing else.

    Posted by mircado | January 22, 2012, 11:13 pm

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