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.
A good that demonstrates nominal increases in demand as income rises that represents a smaller percentage of total spend.
The last goods that people stop buying when income declines.
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