Inferior Good

MoneyBestPal Team
A type of good that experiences a decrease in demand as consumer income increases.

In the language of economics, an inferior good is one whose demand declines as consumer income rises. As consumer income rises, demand for typical items increases, which is the opposite of what is happening here.

A lesser-quality or more affordable version of a standard good is known as an inferior good. When consumers are on a tight budget, substandard items may appeal to them more since they are more reasonably priced than standard goods. But as their wealth rises, they are able to purchase more expensive or higher-quality standard items, which reduces the demand for subpar commodities.

Fast food is one instance of an inferior good. Those who are on a tight budget could choose fast food as a more economical supper alternative. But, when their income rises, they might decide to eat at sit-down establishments, which would reduce the demand for fast food. Public transit is another illustration. When consumers' incomes rise, they might decide to buy their own cars, which would reduce demand for public transit.

It is important to emphasize that a good's classification as inferior or normal is based less on the quality of the good itself than on how the good and the consumer's income relate. A luxury good may be considered to be of poorer quality if demand for it decreases as consumer income increases.

Even though it may seem contradictory, the idea of inferior goods is a crucial one for economists to take into account. Foreseeing how changes in income will impact markets and the economy as a whole requires an understanding of the link between consumer income and demand for goods.