The Market For Books

Readers Question: Are books inferior goods or normal goods?

An inferior good is a good where a rise in income leads to lower demand. It is a good with a negative income elasticity of demand.

“When I get a little money, I buy books. And if there is any left over, I buy food.”

Desiderius Erasmus

Unlike Erasmus, I think most of us would put food ahead of books. Books are generally considered a non-essential, luxury item. A rise in income enables us to purchase more. If you are poor you may just borrow from a library, but with higher incomes, you prefer to buy the book and not have to go to library. I don’t think it would be unreasonable to assume demand for books is a normal good.

I think the market for borrowing library books is more likely to be inferior. If your income rises, you may stop going to library and order any book from Amazon. I doubt Bill Gates goes down to local library to borrow.

However, like all markets, technology can change basic assumptions. In particular, the market for traditional books may be challenged by the growth of new technology such as Amazon Kindle. The ability to read books electronically could lead to the demise of the traditional book market.

Now, if you are a poor student, spending £200 on an electronic reader would be too expensive, therefore you would stick to buying books. However, suppose your income increased, you then may be willing to spend £200 on an electronic reader and buy book downloads. Therefore, your demand for traditional books may decline. In that respect traditional books could become an inferior good. – If people see electronic readers as a close substitute for buying books.

On the other hand, technology could make electronic books so cheap in the future, buying a book may become considered as a luxury item, rather than the cheaper (and perhaps inferior method) of buying books electronically.

Interesting that this questions comes on the day Borders Bookshop is trying desperately hard to avoid going bankrupt – in the face of growing online competition.

To finish off our discussion of books, just a little Groucho Marx –

“Outside of a dog, a book is man’s best friend.  Inside of a dog it’s too dark to read”.  ~Groucho Marx

2 thoughts on “The Market For Books”

  1. my assignment is base on the income elesticity of demand.comming scross this website therefore brovide useful information which then help complete my research

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