Inferior Good

An inferior good is an economic term that describes a good whose demand drops when people’s incomes rise. These goods fall out of favour as incomes and the economy improve as consumers begin buying more costly substitutes instead. An inferior good is one whose demand drops when people’s incomes rise. When incomes are low or the economy contracts, inferior goods become a more affordable substitute for a more expensive good.

Inferior goods may refer to the brand of products purchased, items purchased, or instance of how something occurs (i.e. taking a bus vs. driving a new car).

Inferior goods are the opposite of normal goods, whose demand increases even when incomes increase. Inferior goods also oppose luxury goods, items of higher quality often sold at a premium that are not needed.

In economics, the demand for inferior goods decreases as income increases or the economy improves. When this happens, consumers will be more willing to spend on more costly substitutes. Some of the reasons behind this shift may include quality or a change to a consumer’s socio-economic status.

Inferior goods, which are the opposite of normal goods, are anything a consumer would demand less of if they had a higher level of real income. They may also be associated with those who typically fall into a lower socio-economic class.

Conversely, the demand for inferior goods increases when incomes fall or the economy contracts. When this happens, inferior goods become a more affordable substitute for more expensive goods. The term “inferior good” refers to affordability, rather than quality, even though some inferior goods may be of lower quality.

There are many examples of inferior goods. Some of us may be more familiar with some of the everyday inferior goods we come into contact with, including instant noodles, hamburgers, canned goods, and frozen dinners. When people have less money, they tend to buy these kinds of products. But when their incomes rise, they often give these up for more expensive items.

Groceries are among the most common examples of inferior products because food is a necessity that must always be acquired. However, the level at which consumers by food may vary. As opposed to eating a steak for dinner, an individual may opt for an inferior product such as canned meat or frozen food.

In addition, the way individuals consume food may be classified differently. Individuals may be less likely to eat out, especially at fancier restaurants, in favor of inferior methods of having food prepared such as preparing the meal at home on their own. One method is simply a superior substitute for the other.

We can also turn to transportation as an example of an inferior good. When people’s incomes are low, they may opt to ride public transport. When their incomes rise, they may stop riding the bus and, instead, take taxis or even buy cars. In addition, buying a vehicle may be classified on different tiers, as a used Honda may be considered inferior to a new Tesla.

investopedia.com