Inferior Goods

Published Oct 25, 2023

Definition of Inferior Goods

Inferior goods are goods for which demand decreases as consumer income increases. In other words, when people have more money, they tend to buy less of these goods, and when they have less money, they buy more of them. Inferior goods are usually considered to be lower quality or less desirable than normal goods.

Example

One example of an inferior good is public transportation. When people have lower incomes, they may rely more heavily on public transportation to get around because they cannot afford to own a car or pay for other modes of transportation. However, as their income increases, they may choose to purchase a car or use other forms of transportation, leading to a decrease in demand for public transportation.

Another example is generic brands. When people have lower incomes, they may choose to purchase generic versions of products, such as store-brand cereal or medication, because they are more affordable. However, as their income increases, they may choose to purchase higher-priced, name-brand products instead, resulting in a decrease in demand for generic brands.

Why Inferior Goods Matter

Understanding inferior goods is important for both consumers and producers. For consumers, knowing which goods are considered inferior can help them make informed purchasing decisions based on their income level. For producers, understanding the demand patterns for inferior goods can help them strategize their marketing and pricing strategies to target specific income segments.

Additionally, the concept of inferior goods provides insights into consumer behavior and income elasticity of demand. It highlights how changes in income can influence consumer preferences and purchasing power, which is valuable information for economists, policymakers, and businesses alike.