Inferior Good

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Definition of an Inferior Good:

An Inferior Good is a good for which the demand is inversely related to income, which means that if a person’s income increases, the demand for an inferior good will decrease.

Detailed Explanation:

Consumers purchase more of some goods during periods of financial hardship. Examples include used cars, bus trips, and clothes from thrift stores. These goods are inferior goods. Please note that "inferior" does not relate to the quality of the good, rather it relates to the relationship between the demand for a good and a change in a consumer's income. Inferior goods have demands that are inversely related to income. As income increases, the demand for a product decreases, so the demand curve shifts to the left. A drop in income would result in an increase in the demand for the good or service. In this case the demand curve would shift to the right. Inferior goods usually have more appealing substitutes, so when income rises, consumers will switch to the other good. For example, clothes from a thrift store and new clothes are substitutes. As income increases consumers will purchase new clothes and less from a thrift store. 

Here's a fun video explaining this concept more.


Dig Deeper With These Free Lessons:

Demand - The Consumer's Perspective
Changes In Demand - When Consumer Tastes Change
Supply and Demand - Producers and Consumers Reach Agreement
Fiscal Policy - Managing an Economy by Taxing and Spending

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