Introduction to Inferior Goods
In economics, inferior goods are those goods whose demand decreases when the income of the consumer increases. As an economic concept, inferior goods are associated with lower income groups that choose to consume these products due to their affordability.
Understanding Inferior Good s
Normal goods are those goods whose demand increases when the income of the consumer increases. Inferior goods, on the other hand, are the goods whose demand falls when the income increases, and whose demand rises when the income falls. The demand for such goods is strongly associated with consumer behaviour. What is a common inferior good for one person may not be the same for another person. It depends on the affordability that the consumer can afford. Though due to the common association of inferior goods with people of lower socio-economic groups, some goods, or brands, can be generalized as inferior goods, that, when the income increases, the consumer will choose to choose a substitute of it. This implies that the quality of the inferior good may not be good, though that is not true. The good may be more affordable or less pricey than its substitutes for plenty of reasons (like lesser quality in some cases, less features etc.) but it is still possible that even though the income level has risen, the demand for the inferior good stays unchanged, mostly due to personal preferences. Examples of inferior goods include local, less pricey, provision goods instead of branded ones, choosing less expensive options instead of convenience (home delivery), public transportation etc.
Highlights of Inferior Goods
- Inferior goods have substitutes, whereas giffen goods have no substitutes. Examples of giffen goods include rice, oil, salt etc. though it is possible that there are more expensive choices among them as per personal preferences.
- The notable factor separating giffen goods from normal goods is that even though the price of giffen goods is increasing and income is staying the same, the demand for them will stay the same.
- Inferior goods are related to their affordability, not its quality, though it is possible that these goods are of lower quality.
