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Necessity goods are the last things that customers stop buying when their income declines. Conversely, an individual devotes a lower percentage of their spending to necessity goods as income rises. The following are illustrative examples of a necessity good.
FoodStaple foods and beverages such as bread and coffee.UtilitiesUtilities such as power and water.CommunicationsCommunications such as internet and mobile phone connectivity.HousingHousing costs such as rent. For example, a middle income individual might spend 50% of their after tax earnings on rent. As their income rises, this percentage will tend to decline.TransportationBasic forms of transportation such as public transportation or a bicycle.
MedicineMedical costs such as prescription drugs.EducationEducation may represent an large investment for middle income earners that declines as a percentage of spending as they earn more.ServicesServices such as day-care.NotesDemand for necessity goods often doesn't decline much during a recession. In theory, demand for necessities can increase in a recession as customers drop luxuries for more basic substitutes. Necessity goods are excluded from taxation in many nations. In this context, definitions of what is an isn't a necessity can be quite complex.|
Type | | Definition (1) | A good that demonstrates nominal increases in demand as income rises that represents a smaller percentage of total spend. | Definition (2) | The last goods that people stop buying when income declines. | Related Concepts | |
Goods
This is the complete list of articles we have written about goods.
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