Inferior good

Definition of inferior goods

Inferior goods are those whose demand decreases as the consumer's income increases, which means that less is consumed the more money one has. This happens because the consumer, which has a higher income, can opt for substitute goods which can be more varied or of better quality.

When the price of an inferior good falls, can happen two things:

• Since the price of the inferior good has fallen in comparison to other goods, consumers are more likely to substitute it for other goods and also the quantity demanded increases as a result of the substitution effect.
• Consumers are indeed richer as a result of the lower price. Due to the inferiority of the good, this reduces the quantity needed.

Author: Sonia María Soriano Marín

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