Principles of Economics/Types of Goods

Ordinary goods


Ordinary goods have the indifference curves you have so far seen. As one has more of a good, one obtains less marginal utility from another of that good; the reverse is true for goods that one is relatively lacking. Remember that in these problems the utility results from the use of goods, not how much the goods can be sold for.

Perfect complements


Perfect complements are goods that are useless without the other. Therefore, having more of a good than is required by the other good brings no benefit whatsoever. This is demonstrated in the graph, where having more of good 1 while holding good 2 constant does not increase utility.

Perfect substitutes


Perfect substitutes are goods that exactly substitute for one another at a certain ratio. Having relatively more of a good does not reduce marginal utility because there is no 'relatively more'; you have the same amount of the one substitutable (combined) good.

Ordinary goods often fall in between these two extremes. It's easy to imagine a mostly complementary set of goods to have curve with a rather pointy edge, while a mostly substitutable set of goods would have a curve that is barely bent.