Substitution Goods:

Complementary Goods:

Normal Good:

When income of a consumer increases, he will spend more. When demand for a good increases with increase of the income of a consumer, it is a normal good.

For Example: We had money for only one apple last week. We bought only one apple. But in this week, we have money for two apple. We will buy two apple. So, quantity of purchase increased with the rise of income. This is why apple is the normal good.





How price changes demand?

I am going to explain it with an example. We had $10. We can purchase an apple with that. In this week we have $20. But the price remains unchanged. This will increase demand. But if the price of an apple is $20. We can purchase only one apple.

Inferior Goods:

When income of a consumer increases, he will spend more. But there are some times when the consumption of a particular good decreases with the increase of income.

For Example: We had $20 last week. We rode on bus. We have $40 this week. We rode on CNG taxi this week. So, bus is an inferior good. Actually transportation system is inferior good.





How price changes demand?

I am going to explain with an example. We had $20 last week. We rode on bus. This week we have $40. Last week we needed $40 to ride on CNG taxi but this week it rose to $60. This is why we can't ride on CNG taxi in this week. But if the charge of CNG taxi was at $40 this week, we would have rode on CNG taxi.

Giffen Goods:

When price of a product increases, the demand of the product falls but there are some product that are completely contradictory to this theory. The demand of those product increases as the price increases . Those products are Giffen Goods.

For Example: Some people want to use the most expensive car or goods. The rich people look for those products. There are 40 people who always want to buy the most expensive car. There are 10 very expensive cars. The demand of the cars increases as their price increases. So, these cars are giffen goods.





End

I am not going to write about all of the types and even mention the name of types. I will just discuss about the above mentioned topics with definition and explanation.A good that can replace other good is the substitution good.We can use powder milk or liquid milk with tea. (However, it is not good for health) So, powder milk is the substitution of liquid milk.If the price of powder milk increase and cross the liquid milk, the demand for liquid milk will eventually increase.A good that is an essential additional ingredient of a product is complementary goods.We use milk with tea. Milk is not a part of tea. But in order to create drinkable tea we mix milk with it. It is an essential but additional ingredient. So, milk is a complementary good of tea.If the price of milk is increased demand for milk will decrease and demand for tea also may decrease. It can even stand static depending on the financial situation of the consumer.Azad can spend on drinking maximum $10. He normally spends $8. $5 for tea and $3 for milk. If the price of milk reaches $6, he is going to have to cut his expenditure on milk. So, the consumption of milk will reduce. But if he don't want to reduce milk, he is going to have to reduce consuming tea because if we use less milk, we miss the taste. But if someone is okay with that, he will cut his expenditure on milk. But if someone is not okay with that he is going to have to reduce consuming milk.