Sep 23 2010

Is bicycle transportation an “inferior good”?

This article was originally published on May 12, 2008. It is being re-published since it relates to our current units in AP and IB Economics.

The Associated Press: Gas prices knock bicycle sales, repairs into higher gear

Greg Mankiw has an ongoing series of posts linking to articles illustrating the impact that rising gas prices have had on demand in markets other than that of the automobile.

One of the determinants of demand for goods and services is the price of related goods and services. As gas prices rise, drivers tend to switch from automobiles to alternative forms of transportation. A few days ago I blogged about the switch from tractors to camels in India, one illustration of the relationship between the price of one good and demand for its substitutes. Mankiw has so far linked to articles about the impact of high gas prices on demand for bicycles, small cars and mass transit.

These three “goods” are all substitutes for the most common form of transport among Americans, the private automobile (often times a gas-guzzler in “the bigger the better” America). When the price of a good like personal vehicular transport increases (in this case due to the price of an input required in private cars, gasoline), the demand for a substitute good will increase.

In the case of bicycles, evidence indicates that just such a change in demand is already underway in America today:

Bicycle shops across the country are reporting strong sales so far this year, and more people are bringing in bikes that have been idled for years, he said.

“People are riding bicycles a lot more often, and it’s due to a mixture of things but escalating gas prices is one of them,” said Bill Nesper, spokesman for the Washington. D.C.-based League of American Bicyclists.

“We’re seeing a spike in the number of calls we’re getting from people wanting tips on bicycle commuting,” he said.

Interestingly, the increase in demand for bicycle travel in response to high gas prices might be even more pronounced due to America’s sluggish growth, 4% inflation and rising unemployment. Real wages have seen little gain in the last couple of years as growth has fallen close to zero while prices have continued to rise. It may be possible that a fall in real incomes in America has spurred new demand for bicycle transportation, which could be considered an inferior good, meaning that as household incomes fall, consumers demand more bicycles for transportation.

Since bicycles represent such a drastically cheaper method of transportation, high gas and food prices, a weak dollar, and falling real wages accompanying the economic slowdown have had a negative income effect on American consumers, leading to increases in demand for inferior goods such as bicycle transportation

That said, having worked in a bike shop myself for two years in college, I can say that most consumers looking at new bicycles are not doing so because of falling incomes. Quite the opposite, in fact, indicating that new bicycles are normal goods (those for which as income rises, demand rises). However, the article states that in addition to increases in new sales, “more people are bringing in bikes that have been idled for years”.

It may be that while new bicycles themselves are normal goods, bicycle transportation as a whole is an inferior good. The increase in demand for new bicycles could be explained by the substitution effect (as the price of motor vehicle transportation rises, its substitute, bicycle transport, becomes more attractive to consumers) and at the same time explained by the income effect too (as real incomes have fallen, demand for the bicycle transport has risen).

This phenomenon is an excellent illustration of how the income and substitution effects work in conjunction to explain the inverse relationship between price and quantity demanded for automobiles (the law of demand), as well as the concept of cross-price elasticity of demand between two substitute goods.

Discussion Questions:

  1. Both the price of substitute goods and income affect demand for a particular product. How have both the prices of substitutes for bikes and the income of bike consumers influenced the demand for bicycles in different ways?
  2. What is the definition of an “inferior good” in economics?Do you believe bicycle transportation is an “inferior good”?
  3. Are all bikes the same? Do you think demand for some bicycles responds differently to changes in income than demand for other bicycles?

About the author:  Jason Welker teaches International Baccalaureate and Advanced Placement Economics at Zurich International School in Switzerland. In addition to publishing various online resources for economics students and teachers, Jason developed the online version of the Economics course for the IB and is has authored two Economics textbooks: Pearson Baccalaureate’s Economics for the IB Diploma and REA’s AP Macroeconomics Crash Course. Jason is a native of the Pacific Northwest of the United States, and is a passionate adventurer, who considers himself a skier / mountain biker who teaches Economics in his free time. He and his wife keep a ski chalet in the mountains of Northern Idaho, which now that they live in the Swiss Alps gets far too little use. Read more posts by this author

96 responses so far

96 Responses to “Is bicycle transportation an “inferior good”?”

  1. Sarah Eggeron 24 Sep 2010 at 5:32 am

    1. Both the price of substitute goods and income affect demand for a particular product. How have both the prices of substitutes for bikes and the income of bike consumers influenced the demand for bicycles in different ways?

    Bikes might be very desirable for different people because of two different reasons. One reason might be that the prices for the bikes substitutes such as cars have risen and therefore a consumer finds it better to spend his money on a bike instead of the expensive car. The price of the bike will not change because the quantity demand for bikes got bigger. If a consumers income changed, for example the comsumer earns more, he/she might feel like they can buy a more expensive bike or find that they are saving a lot of money by still buying an older bike.

    2. What is the definition of an “inferior good” in economics?Do you believe bicycle transportation is an “inferior good”?

    The definition of inferior good is a good that decreases in demand when consumer income rises and which increases in demand when consumer falls. I think it depends on which country is looked at. In a wealthy country bicycles are not inferior goods since people will still buy bikes if their income rises, depending on interest. However, in a less wealthy country this might be the case.

    3. Are all bikes the same? Do you think demand for some bicycles responds differently to changes in income than demand for other bicycles?

    No, not all bikes are the same. There are more expensive products and less expensive product in every market. The demand for an expensive bike might be high because it's a good product which is at better quality. When there are changes in income, this might change. If income falls people might still demand the expensive bicycle but know that they can't afford it so the quantity demand for the cheaper bicycle might therefore be higher.

  2. Matt Burnhamon 24 Sep 2010 at 6:39 am

    1. As the price of substitute goods like Cars become increasingly expensive due to scarcity of resources needed for their production; the general consensus is to refrain from buying cars and switch to buying bicycles. However the consumer's income determines whether the consumers' will be buying new bikes or second hand. With the more people switching from cars to bicycles the demand and price will increase causing bike consumers to not buy as many new bikes.

    2. An inferior good is a good that as the income of a consumer increases the demand for that good decreases. I don't believe that bicycles are inferior goods because no matter how rich the country is people will still demand bikes for personal or recreational use. Also as we are pressed more and more on the subject of global warming people will change from their cars and most likely switch to bikes. This applies to areas with high incomes and places with low incomes as well.

    3. Definitely not all bikes are the same, there are hundreds of different types of bikes from street to mountain bikes. The demand for some bikes will respond differently than others because specialized types of bikes will cost more than regular commuter bikes so there has to be an increase income from the consumer to be able to afford the specialist bikes where as the cheap commuter bikes wont be as affected as much.

  3. Chris Bertramon 24 Sep 2010 at 3:35 pm

    1. Both the price of substitute goods and income affect demand for a particular product. How have both the prices of substitutes for bikes and the income of bike consumers influenced the demand for bicycles in different ways?

    As the bikes are a substitute good for cars, the demand for bikes increases as the price for maintaining a car increased and therefore made it cheaper to use a bike to get to places. In addition to that, the income of the people decreased and as bikes are inferior goods, the demand for them increased

    2. What is the definition of an “inferior good” in economics? Do you believe bicycle transportation is an “inferior good”?

    An inferior good is a good where the demand decreases when the income of the consumers increases. Bicycle transportation is an inferior good as this example shows. As the income of the people decreased, the demand for bicycles increased. If bicycle transportation were a normal good, the demand of bikes would decrease as the income of the consumers decreased as well.

    3. Are all bikes the same? Do you think demand for some bicycles responds differently to changes in income than demand for other bicycles?

    I don’t think that all the bikes are the same. If you look at the cheap commuter bikes, the demand for bikes will increase as the income decreases. However, expensive mountain bikes will behave like normal goods as consumers won’t spend that much money on expensive bikes when they have a lower income..

  4. Graham N.on 25 Sep 2010 at 5:47 am

    1. Using the the substitution effect, if prices of substitutes for bikes increase, the demand of bikes should increase. In this case, the increase in the total costs of car ownership (car + maintenance + gas, etc.) has increased the demand for new bicycles as well as repairs of older bikes. The income effect states that as prices rise, consumers feel that they have less purchasing power and purchase less of normal goods, and more of inferior goods. This has caused a similar increase in the demand for bicycles and bicycle repairs, as they can be considered inferior. However, if most bicycle consumers are assumed to be more wealthy, making bikes a normal good, then the demand of bikes should decrease as the nominal incomes of the consumers in this market decrease.

    2. An inferior good is one that consumers purchase more of when their incomes drop, but purchase substitutes of when incomes increase. I feel that bicycle transportation is inferior in most parts of the world where income is low, but not in developed nations. As another commenter pointed out, in China, people switch from bikes to cars as soon as they have the money to do so. This would make bicycles an inferior good. However, in America, unless consumers are extremely poor, an increase in the price of gas would cause less driving and more grumbling, and bicycles function as a normal good.

    3. No, all bikes are not the same. The market is certainly different for $25 used junkers that that of $5000 carbon-fiber mountain bikes. Demand for lower end bicycles should function as an inferior good, as they are a substitute for other forms of transportation. High-end bicycles should function as normal goods, as this product is consumed mostly for the utility it gives the consumer rather than its function as a substitute.

  5. Christophon 26 Sep 2010 at 10:20 pm

    If the prices for complements of bicycle substitutes, such as petrol or train tickets, rise, the demand for bikes will increase. Consumers see bicycles as the next best and cheaper alternative and use the bike more frequently. During rough financial times, the incomes of many people have fallen. The income effect states that consumers with a low income perceive that they have a lower purchasing power, if product prices rise. Consumers with lower incomes try to avoid high maintenance prices for cars, and switch over to bicycles.

    An inferior good is a product for which the demand decrease if incomes increase. In general terms, bicycle transportation is an inferior good. Excluding the poorest countries in the world, consumers will switch forms of transportation if their income changes. Consumers with high incomes will use the car more frequently and use bicycle transportation if they are earning low incomes.

    All bikes are not the same. Hand-manufactured, high quality bicycles are expensive and can be classified as normal goods. As consumers' incomes rise they are willing to pay more for these "unique" products. Everyday transportation bicycles, built in developing countries, cost less act as inferior goods. Their demand will decrease during prosperous times, and will increase if people earn less money.

  6. Thomas Son 27 Sep 2010 at 12:16 am

    1. Both the price of substitute goods and income affect demand for a particular product. How have both the prices of substitutes for bikes and the income of bike consumers influenced the demand for bicycles in different ways?

    Bikes are a substitute good for cars and therefore the demand for bikes increases as the price for buying a car increased. Because bikes are an inferior good, the demand for bikes increases, as the income of the consumer falls.

    2. What is the definition of an “inferior good” in economics? Do you believe bicycle transportation is an “inferior good”?

    An inferior good is good for which the demand decreases as general incomes rise and the demand increases as income falls. Bicycle transportation is a inferior good, because when the general incomes fall the demand increases, as mentioned in the post. If bicycle transportation were a normal good, the demand would actually decrease as general incomes fall, because consumer had less income to spend.

    3. Are all bikes the same? Do you think demand for some bicycles responds differently to changes in income than demand for other bicycles?s

    In my opinion all the bikes aren't the same. The demand for very expensive bikes wouldn't increase as the general income fall. But the demand for cheap bikes would increase as the income of the consumer falls, because in this case bikes are an inferior good.

  7. Alain Meyeron 27 Sep 2010 at 2:10 am

    1. If the price of substitute goods, such as gasoline (cars) and train tickets rise, the demand for bikes will also rise. If one owns a car, it will become increasingly expensive to keep using that good. And so, people will find cheaper alternatives, such as bicycles which will provide them with long term savings. The income effect states that as people's incomes increase, they will consume more goods and potentially more normal goods than inferior goods. Bicycle transportation is inferior, and so people with lower incomes will use bikes more often. People with higher incomes are more likely to use cars.

    2. An inferior good is a good that less is demanded of as people's incomes rise, and as incomes fall, demand increases. Bicycle transportation is most definitely an inferior good, as people who are able to afford cars will almost always drive one. They are quicker for the most part and allow you to use them no matter the weather. Purchasing bicycles themselves is not inferior, however the bicycle travel industry as a whole is.

    3. No, all bikes are not the same. They differentiate by what type of terrain and situations they are suited for, how many gears they have, how big they are, how many extra settings they have and how they are designed. Certainly different bicycle demands are different depending on the bike. If a bike is on the higher end of things, they are going to be on the favorable side of the rising income effect, but then also on the negative side of the falling income effect.

  8. Maphrida Forichion 27 Sep 2010 at 6:10 am

    1. Both the price of substitute goods and income affect demand for a particular product. How have both the prices of substitutes for bikes and the income of bike consumers influenced the demand for bicycles in different ways?

    When the substitute goods of any product increase in cost, the demand for that particular product experiences a increase in demand, as it becomes seemingly less costly than its substitutes. This is the case with the bicycles, they became more in demand when owning a car consumed a lot of money. People substituted car transportation with bicycle transportation. Because america was experiencing a rise in unemployment, people's income seemed to become less and less. Perhaps the price of petrol didn't increase, but it seemed to have done so because consumers received low income.

    2. What is the definition of an “inferior good” in economics?Do you believe bicycle transportation is an “inferior good”?

    An inferior good is a good that poses as a basic necessity and is directly related to the less wealthy/poorer people in the economy. It is a good which consumers buy more of when their incomes fall. I do believe that bicycle transportation is an inferior good because bicycles are utilized when one cannot afford a car. Even if their cost increases, they will always be cheaper than cars making them still more affordable. During this time period, the demand for bicycles increased.

    3. Are all bikes the same? Do you think demand for some bicycles responds differently to changes in income than demand for other bicycles?

    No, not all bikes are the same. Some are used for leisure activities, but the ones being discussed in this case are the basic ones used as substitute transportation. The bikes utilized for leisurely tasks would experience an increase in demand as income increases. And in comfortable situations, the basic pedaling bikes experience a decrease in demand as income increases.

  9. Eamon Emonsta Stensoon 27 Sep 2010 at 3:34 pm

    Both the price of substitute goods and income affect demand for a particular product. How have both the prices of substitutes for bikes and the income of bike consumers influenced the demand for bicycles in different ways?

    Ithink that the more money you earn the more things you will buy. the more money you earn your more liekly to buy a bike as you have extra income. If you just have engouh to pay for food etc then you wont be buying a new bike.

    What is the definition of an “inferior good” in economics?Do you believe bicycle transportation is an “inferior good”?

    An inferior good is a good that is cheaper than a normal good. An example would be Getting Heinken vs Coop Premium Beer. This is due to the taste and the cost. I think that Bicycle Transportation can be both, If you live in America than it would be an Inferior good as once your 16 you will more than likely have a car so the bike is pointless. If you live in a country such as Holland or china then i think the bike is a means of transport. People use the bike on a regular basics.

    Are all bikes the same? Do you think demand for some bicycles responds differently to changes in income than demand for other bicycles?

    Every bike has the same mechanics. You pedal it and it goes. The thing that some bikes have that makes it special is the weight, the style, the gears and brakes so the bike goes quicker, slow breaks better. Also you have mountain bikes were specialise in mountain biking so i do think the more money you make you will buy a higher end bike but this is with your taste and preferences.

  10. NPon 27 Sep 2010 at 7:26 pm

    1.Both the price of substitute goods and income affect demand for a particular product. How have both the prices of substitutes for bikes and the income of bike consumers influenced the demand for bicycles in different ways?

    Demand for bikes increases as the price for buying a car increased because bikes are a substitute good for cars. Demand for bikes increases, as the income of the consumer falls because bikes are an infirior good.

    2.What is the definition of an “inferior good” in economics?Do you believe bicycle transportation is an “inferior good”?

    An inferior good is a good where the demand falls when the income of the consumers rises. Bicycles are inferior goods because it is a good that people will turn to and buy when their income falls which leads them not being able to afford a car.

    3.Are all bikes the same? Do you think demand for some bicycles responds differently to changes in income than demand for other bicycles?

    Not all bikes are the same . Expensive bikes would not epxerience an increase as the general income falls. But the demand for cheap bikes would increase as the income of the consumer falls, because in this case bikes are an inferior good.

  11. Lisa Con 27 Sep 2010 at 7:30 pm

    1: The price for bikes would not change because the quantity demand will have increased so the producers of bikes are already gaining a profit from the other transportations misfortune. If the price of cars increase people may either just buy one car instead of one, others may consume a bike to save money. If you buy a bike it becomes much cheaper for you to go places. The income of the people decreased and as bikes are inferior goods, the demand for them increased.

    2: The definition of an inferior good in economics is: goods for which a fall in income leads to an increase in demand or a rise in income leads to a decrease in demand. Do I believe that bicycle transportation is an inferior good? Yes, because if prices of other transportation does increase, most of the human Population will resort to buying other sort of transportation, cheaper forms like bicycles.

    3: All bikes are not the same because some of them are designed to carry out different things. There are such things as mountain bikes and then there are normal bikes for a person to ride on a normal day to work. Some bikes are used just for transportation whilst others for other activities. If you receive a lower income that normal and cannot afford, or will struggle to afford a car you will most likely buy a cheaper sort of transportation. In this situation many would buy a bike, or possibly take public transportation.

  12. Konstantin Bon 28 Sep 2010 at 1:43 pm

    1. As prices for fuel increase and transportation by one's own car gets increasingly more expensive the demand for the substitute good – the bicycle – increased. On the other hand, if a person's income decreases he or she cannot spend that much money anymore and has to save some. One way of doing this is by cutting down transportation cost by shifting to the use of bicycles.

    2. An inferior good is a good for which the demand increases when income falls and vice versa. Yes I believe that bicycle transportation is an inferior good as people mostly decide to ride their bikes because they are trying to save money on transportation.

    3. Not all bikes are the same, and so are their demands. For example there is a difference between cheap and expensive, branded bikes. And based on these differences there will also be different responds to a change in income.

  13. Isabelle Yon 28 Sep 2010 at 4:53 pm

    |||||Both the price of substitute goods and income affect demand for a particular product. How have both the prices of substitutes for bikes and the income of bike consumers influenced the demand for bicycles in different ways?

    An increase in fuel prices means an increase in the costs of personal car transportation. As the prices rice, the demand for cars will fall because people are unwilling to pay that much to support their car-driven lifestyle anymore. Less money will be available for other luxuries (clothes, food , etc) Instead, more and more consumers will choose to go for the substitute good – bikes – so they can maintain other aspects of their lifestyles.

    A decrease in income would mean less disposable income which leads to making choices about what to buy. Consumers will feel pressured to get things as cheap as possible therefore choosing bikes over cars – no fuel prices ! yay !

    ||||| What is the definition of an “inferior good” in economics?Do you believe bicycle transportation is an “inferior good”?

    An inferior good is something that people only buy because they don't have enough money to buy the 'better' alternative (like homebrand chips instead of lays). Eventually the demand for these inferior goods disappears when the average household income gets high enough.

    I don't agree that bicycle transportation in an 'inferior good'. Some people may still choose to ride bicycles instead of cars because they just like it – here the deciding factor is the individuals tastes and preferences. Some people may take bike riding as their hobbies.

    ||||| Are all bikes the same? Do you think demand for some bicycles responds differently to changes in income than demand for other bicycles?

    Nope. Not all bikes are the same. Like every product there'll be a range in quality, prices, sizes and designs available to consumers. Some bikes could be seen as 'cheap' while others could be seen as 'luxury' bikes. These different factors will determine how the bike responds to changes in income.

    eg. If someone has an increase in income, they may splurge on a luxury bike instead of buying a 'cheap' bike.

  14. Keun-Hoon 28 Sep 2010 at 5:31 pm

    1. Both the price of substitute goods and income affect demand for a particular product. How have both the prices of substitutes for bikes and the income of bike consumers influenced the demand for bicycles in different ways?

    Ans) The substitutes for the bikes is when car is too expensive to use. They use the bike instead of the car. When income rise, if the good is inferior good, the income rise, however the demand for the bike will fall. If it is a normal good, then the income goes up and the demand will go up too. since the bike is normal good, the demand will go up.

    2. What is the definition of an “inferior good” in economics?Do you believe bicycle transportation is an “inferior good”?

    Ans) Inferior good is when goods for which a fall income leads to an increase in demand or a rise in income leads to a fall. I think it is a inferior good because today the income for the people are falling, however the demand for car is falling, but bike is going up

    3. Are all bikes the same? Do you think demand for some bicycles responds differently to changes in income than demand for other bicycles?

    Ans) Yes. the cheaper ones and the expensive one for demand is very different. People want to buy the expensive ones because they think that it has more better quality than the cheaper ones

  15. Geoffroy the Frenchion 29 Sep 2010 at 3:54 am

    1. Both the price of substitute goods and income affect demand for a particular product. How have both the prices of substitutes for bikes and the income of bike consumers influenced the demand for bicycles in different ways?

    Well the fact that the price of fuel went up means the price to own a car goes up making it more expensive. However with a decreasing income paying more seems not to be the wisest choice. Bikes are substitutes that cost much less, appealing to a consumer that has a income which can barely afford car transportation but very easily afford a bike.

    2. What is the definition of an “inferior good” in economics?Do you believe bicycle transportation is an “inferior good”?

    Bikes are not rescission proof good rather than a inferior good. An inferior good is a good in which demand actually decreases as income rises, and demand increases as incomes falls, meaning that the rich people don't own bikes, which is untrue. Surely the demand will go down as income rises as bike will most likely become more of luxury then a need (transportation) but never the less there would still be a demand of bikes if everyone was a millionaire.

    3. Are all bikes the same? Do you think demand for some bicycles responds differently to changes in income than demand for other bicycles?

    Not all bikes are the same, that is certainty, some are more luxurious(more recreational) then others . AS income decreases cheap bikes that are sturdy might have a higher demand while as the income of consumers goes up the demand for expensive speed bikes with all the useless features goes up.

  16. Beatrice Benderon 30 Sep 2010 at 6:07 am

    1. Both the price of substitute goods and income affect demand for a particular product. How have both the prices of substitutes for bikes and the income of bike consumers influenced the demand for bicycles in different ways?

    The income effect of the consumers play a role as to when their income decreases their demand for bikes will increase, because they will no longer be able to pay for the petrol for their cars. Therefore the demand for bikes will rise and the demand curve will move outwards. On the other hand if the prices increases for the substitutes of bike such as cars, the demand will be dropping for cars, hence moving the demand curve inwards, but for the bike market there will be an outwards movement.

    2. What is the definition of an “inferior good” in economics? Do you believe bicycle transportation is an “inferior good”?

    An inferior good in economics means that this is a good that gains demand when the income decreases of the consumers and likewise the other way around, when the income increases the demand will drop again. I do believe that bicycle transportation is an inferior good, because as we can see in America when the oil prices were extremely high, peoples wages/incomes were low and bikes acted as the "inferior goods" to the consumers and this was when the demand for bikes increased.

    3. Are all bikes the same? Do you think demand for some bicycles responds differently to changes in income than demand for other bicycles?

    Of course all bikes are not the same within the bike market there are different firms which might be well known and therefore have higher prices. It depends on the wheels, guarantee and what type of bike you get e.g. mountain bikes are more expensive than a normal bike. Therefore if the incomes of consumers are low, they would most likely buy a simple bike rather than a expensive mountain bike. So even within the bike market there will be a difference between the types of bikes and depending on their prices and the consumers income the demand will either rise or drop.

  17. Francesca Perversion 30 Sep 2010 at 8:21 pm

    1. If the prices of substitutes for bikes for example automobiles and public transportation rise, and the cost of bicycles remains the same there will be an increase in demand for bicycles. As incomes increase, people will consume more goods and more normal goods than inferior goods. Bicycles are inferior, and so people with lower incomes will use bikes more often. People with higher incomes are more likely to use cars. For those who use bicycle transportation, their income determines whether they will buy new bicycles or second hand bicycles.With the more people switching from cars to bicycles the demand and price will increase causing bike consumers to not buy as many new bikes.

    2. Inferior goods can be viewed as anything a consumer would demand less of if they had a higher level of real income. This occurs when a good has more costly substitutes that see an increase in demand as the society's economy improves. An inferior good is the opposite of a normal good, which experiences an increase in demand along with increases in the income level. I I don’t think that bicycles are inferior goods because no matter how rich people is, will still demand bikes.

    3. All bicycles are not the same. people earning high salaries are able to buy new or better bikes and pay for other forms of transportation while people with lower salaries are less likely to buy new bikes but are more likely to buy old bikes or purchase resources with which they could make their own.

  18. Philippaon 01 Oct 2010 at 5:28 am

    Both the price of substitute goods and income affect demand for a particular product. How have both the prices of substitutes for bikes and the income of bike consumers influenced the demand for bicycles in different ways?

    Bicycles and cars are substitute goods as methods of transportation. As the price of cars and the petrol for the car has increased, the demand for bicycles, as an alternative method of transportation, has increased. This shows that bicycle transportation is inferior to owning a personal car; those with higher incomes will purchase a car, those with lower incomes will use bicycles as a way of traveling. However, bicycles can also be seen as normal goods. As the consumer’s income increases, the consumer may use the money to buy a new recreational bike e.g a mountain bike. This shows that as the consumer’s income increases, the demand for bikes will also increase. This is the relationship between income and demand for normal goods.

    What is the definition of an “inferior good” in economics? Do you believe bicycle transportation is an “inferior good”?

    Inferior goods are demanded less as the peoples’ income rises and are demanded more of as income falls. Bicycle transportation could be an ‘inferior good’ because they are demanded more of (as seen in the article) as prices of petrol and cars increase. If one’s income was falling, spending money frequently on petrol or car maintenance would not be ideal. Therefore, one would more likely invest in a bicycle. However bicycle transportation may not always be an ‘inferior good’. Sometimes it may actually be easier to travel somewhere on a bicycle rather than in a car. For example, if you didn’t want to sit in traffic, or if there was a shortcut where cars were not able to go or if you had to pay congestion charge or parking i.e in big cities like London.

    Are all bikes the same? Do you think demand for some bicycles responds differently to changes in income than demand for other bicycles?

    Bicycles are definitely not all the same. The ones with more gears, better suspension, additional settings, or a more comfortable saddle are obviously going to be more expensive than the standard bike with two wheels, a saddle and handle bars. The different types of bike that suit different terrain also vary in price, for example a racing bike or a mountain bike compared to the bicycle with a basket at the front which you ride to your local store. As income falls, the cheaper ‘bicycles with a basket’ are going to be demanded more than the more expensive, newest mountain bike.

  19. Roberton 01 Oct 2010 at 9:35 pm

    Cycling may be an "inferior good," but I'd argue that in many ways it is an artificial inferior good in America. The car culture is so heavily subsidized (drivers don't pay for pollution, don't pay the full price of gas or parking or infrastructure, etc.) that its cost is artificially low and driving is artificially attractive. In addition, reckless driving is so widely tolerated by the culture that the "cost" of cycling is artificially inflated by fears of being victimized by someone else's illegal and antisocial behavior.

    Any economic analysis of cycling has to look seriously at the incentives that are in place.

  20. Pilar Mulleron 05 Oct 2010 at 5:23 pm

    1. Income, of course, plays a huge role in determining which goods or services will be bought. If the consumers are seeing that automobile prices are rising, they will have to switch over to other transportation methods like bicycles or public transportation. Since automobiles are considered normal goods, as the income rises demand will increase at the same time. However, if that is not the case, some consumers will want to switch over to renting or buying bicylces to commute in a city.

    2. The definition of an "inferior good" is that as income of a consumer rises, he/she will be consuming less of that particular inferior good. I would not consider a bicycle being an inferior good. Of course, it might not have the same level like a car, but still I would consider bicycles to be the cheaper alternative of a "normal good". If we now look at "car transportation" or "bicycle transportation", surely the latter would fall into the category of being an inferior good.

    3. No, I do not think that all bikes are the same. Bicycles can be REALLY expensive. There is such a huge bicylce spectrum ranging from mountain bikes to normal city bikes. Therefore, I would say that demand for different bicycle models will be different depending on the bike's features.

  21. Katrina S.on 14 Nov 2010 at 3:26 am

    1. The price of a substitute for a bike is pretty expensive, if not in money, than in time. An alternative mode of transportation, such as a car, is exceedingly more expensive than a bike. A train, however, isn't expensive in the short-term (i.e. the cost of a one-way ticket), but if a commutor uses the train regularly, costs can build up. Walking is free, but is a lot more time-consuming. Because incomes, in general, have been decreasing, the bike as a mode of transportation has become much more attractive. It is inexpensive, and efficient for short trips. The lower income of consumers make the common costs of a car foreboding. The gas money, insurance, and maintenance costs of a car make the bike an attractive mode of money-saving transportation, which makes the demand for bicycles go up. The fitness craze also makes bike-riding a bit more desireable.

    2. An inferior good is described as one for which its demand goes down as the consumer's level of income goes up. I believe that bicycle transportation is an inferior good because if a less time consuming and easier mode of transportation is available, but is also more expensive, people will choose that good, instead, when their budget allows.

    3. Not all bikes are the same. Some, such as mountain bikes, are exceedingly expensive because they are meant for athletes and serious bicyclists that don't just bike to go to the convenient store. Other, more generic bicycles, cost less and apply to a larger group of consumers. In days of economic prosperity, I believe the demand for the sporty bikes would go up because consumers would have more money to spend on a hobby. Conversely, when incomes go down, the demand for a generic bike as a mode of transportation might go up because of its financial efficiency.

  22. […] Jason Welker at 11:06 pm under Determinants of Demand,Product markets,Substitutes,Supply/Demand I feel like I’ve been here before. Gas prices are rising, approaching $4 per gallon. American drivers are freaking out, demanding the […]

  23. […] Is bicycle transportation an “inferior good”? […]

  24. Vincent Wengon 10 Oct 2011 at 4:30 pm

    1. Both the price of substitute goods and income affect demand for a particular product. How have both the prices of substitutes for bikes and the income of bike consumers influenced the demand for bicycles in different ways?

    —As the price of substitutes for bikes rise, people would rather buy bikes than other transportation, because the bikes become more attractive to consumers.

    When the income of bike consumers rise, which means their real income rise. As real incomes rise, demand for the bicycle transport will fall.

    2. What is the definition of an “inferior good” in economics? Do you believe bicycle transportation is an “inferior good”?

    —Inferior good is something you don’t want to buy when you get richer, those things are usually very cheap and imply the owner’s low status. I believe that bicycle is an inferior good, because in now a day’s society, riding a bike usually means you are poor, so people would like to get rid of it when they get richer.

    3. Are all bikes the same? Do you think demand for some bicycles responds differently to changes in income than demand for other bicycles?

    —No. Although most bikes are very cheap, however, Some bikes use for racing are very expensive. Demand for this kind of bikes responds differently to changes in income than demand for other bicycles. When the riders’ income rise, they will hunt for a better bike. So the demand for this kind of bikes will rise.

  25. […] Is bicycle transportation an “inferior good”? […]

  26. Nicole and Wen Wenon 02 Oct 2012 at 1:12 pm

    1. Both the price of substitute goods and income affect demand for a particular product. How have both the prices of substitutes for bikes and the income of bike consumers influenced the demand for bicycles in different ways?

    The rise of income in consumers causes them to buy more bikes or buy more expensive and better bikes compared to before. For the substitutes of the bikes, which are cars, whose price of its complementary good, petrol and gasoline has risen, thus it reduces the quantity demanded by consumers and more would opt for bikes as the substitute product. In the first case, bikes are seen as normal goods because as income increases, quantity demanded increases as well. In the second case, it is seen as an inferior good compared to a car thus when income increases, the quantity demanded of the bikes reduces as people would want to purchase a car.

    2. What is the definition of an “inferior good” in economics?Do you believe bicycle transportation is an “inferior good”?
    An inferior good is a good that decreases in demand when consumer income increases. When compared to vehicles like cars, it can be seen as an inferior good as a main medium of transportation.

    3. Are all bikes the same? Do you think demand for some bicycles responds differently to changes in income than demand for other bicycles?
    No, there are better quality bikes such as mountain bikes. Yes, demand for some bicycles do respond differently to changes in income because the lower range bikes can be seen as inferior goods compared to the better quality ones. Thus, for the lower range bikes, as income decreases, demand increases; if income increases, the demand for better quality bikes increases.

  27. annonymouson 02 Oct 2012 at 3:44 pm

    Both the price of substitute goods and income affect demand for a particular product. How have both the prices of substitutes for bikes and the income of bike consumers influenced the demand for bicycles in different ways?
    When the incomes of the bike consumers fall, the demand for bicycles bicycles as a normal good decreases. However, the demand for bicycles as transportation; an inferior good, then increases.

    What is the definition of an “inferior good” in economics?Do you believe bicycle transportation is an “inferior good”?
    An inferior good is a good that is in high demand due to the fall of incomes. I do believe that bicycle transportation is truly an inferior good because the increasing prices of motor vehicle transportation has caused the demand of bicycle transportation to increase.

    Are all bikes the same? Do you think demand for some bicycles responds differently to changes in income than demand for other bicycles?
    Not all bikes are the same. I do think demand for some bicycles respond differently to changes in income than demand for other bicycles.

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