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'''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 that can be more varied or of better quality.When the price of an inferior good falls, can happen two things <ref> Rittenberg, L. (2012)p.180 </ref>:
'''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 that can be more varied or of better [[quality]].When the [[price]] of an inferior good falls, can happen two things <ref> Rittenberg, L. (2012)p.180 </ref>:
* 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.
* 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.  
* Consumers are indeed richer as a result of the lower price. Due to the inferiority of the good, this reduces the quantity needed.  
At some income levels, a good might be a normal good for a person, but at other income levels, it might be an inferior good.
Understanding these traits can aid in evaluating their significance as inferior goods frequently share certain characteristics. For instance, the majority of inferior products fall into a broad category with a few other higher-quality (and more expensive) products.
Consider the hamburger: it is a specifically defined good that falls within the broad category of meat. There are various more expensive and higher-quality meat [[options]] available, like fillet mignon, prime rib, and veal.
It makes sense that some people would eat less hamburger as their wealth increased since they could now acquire better-quality alternatives that nevertheless satisfy the same basic [[needs]] but do so more satisfactorily <ref> Browning,E.,Zupan, M.(2020) p.63 </ref>.


== Difference between Giffen Goods and Inferior goods==
==Difference between Giffen Goods and Inferior goods==
The difference between Giffen goods and inferior goods can be established based on the following arguments <ref> Chaunan, SPS. (2009) p.199 </ref>:
The difference between Giffen goods and inferior goods can be established based on the following arguments <ref> Chaunan, SPS. (2009) p.199 </ref>:
* Goods whose demand increases when prices rise are called Giffen goods.  
* Goods whose demand increases when prices rise are called Giffen goods.  
* Goods whose demand decreases when consumer income rises above a certain level are called inferior goods.  
* Goods whose demand decreases when [[consumer income]] rises above a certain level are called inferior goods.  
* Giffen goods violate the law of demand, and inferior goods are part of consumer goods and services and are determinants of demand.
* Giffen goods violate the law of demand, and inferior goods are part of consumer goods and services and are [[determinants of demand]].
* There are no close substitutes for Giffen goods. On the contrary, inferior goods have better-quality substitutes.
* There are no close substitutes for Giffen goods. On the contrary, inferior goods have better-quality substitutes.
* When prices fall, the overall price effect of Giffen goods will be negative. On the other hand, the price impact of inferior goods will be positive when prices fall.
* When prices fall, the overall price effect of Giffen goods will be negative. On the other hand, the price impact of inferior goods will be positive when prices fall.
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==Characteristics of inferior goods==
==Characteristics of inferior goods==
In economics, inferior goods are characterised by the variation which the demand for these products undergoes according to the income of consumers.
In [[economics]], inferior goods are characterized by the variation which the demand for these products undergoes according to the income of consumers <ref> Sampat, M., Mallinath, M., Amitava, G., (2013) p.84 </ref>:
* '''Negative income elasticity''': An increase in people's income causes a decrease in the quantity demanded of the inferior good, due to this the increase in people's income has a negative income elasticity, the higher a person's budget, the lower the consumption of an inferior good.
* '''Negative income elasticity''': An increase in people's income causes a decrease in the quantity demanded of the inferior good, due to this the increase in people's income has a negative income elasticity, the higher a person's budget, the lower the consumption of an inferior good.
* '''Positive demand curve''': An increase in the price of these goods does not have a negative effect on demand, which, despite the higher price of commodities, is the cheapest option for lower-income consumers.
* '''Positive demand curve''': An increase in the price of these goods does not harm demand, which, despite the higher price of commodities, is the cheapest [[option]] for lower-income consumers.
Consequently, this demand curve will always be positive, due to the income effect.
Consequently, this demand curve will always be positive, due to the [[income effect]].


== Examples of inferior goods ==
==Examples of inferior goods==
The most common types of substandard products are <ref> khatabook.(2022) </ref>:  
Some examples of inferior goods are <ref> Anderton, A. (2004). p. 66 </ref> <ref> Lipsey, R., Harbury, C.(2004) p.46 </ref> <ref> Myers, D. (2009) p.61 </ref> :  
* '''Edibles'''. Edibles are the most common use of inferior products. For example, buy groceries at a local market. These items are cheaper than similar items in supermarkets and similar shops. As they are not branded, they are cheaper and there is not much difference in quality.
* '''Bread''': is a cheap, filling food that consumers switch from to more expensive meat or convenience foods as their incomes rise.
* '''Transportation'''. Another common low-quality item is shipping. Customers with lower disposable incomes are more likely to use public transport, such as trains and buses. As their income increases, they may decide to buy a car instead of relying on public transport. Fast food
* '''Margarine''': is a food that consumers switch from margarine to butter, although this has recently become less true due to increased health awareness.
Some consider '''fast food''' to be a second-class product, although many consumers, regardless of their income level, prefer it. Today, fast food is a poor substitute for regular food compared to dining out in a fancy restaurant. Dining out is more expensive and tends to be reserved for those who have more money.
* '''Bus transportation''': is a [[service]] that consumers switch from to their cars when they can afford to purchase a car.
* '''Place of residence'''.The travel stay may also be shorter. Clients with less money may choose to stay in a small hotel or hostel during their trip rather than a more luxurious establishment. As income increases, they may prefer to live in high-end "commodity" accommodations, such as hotels or resorts. generic branding
* '''Color TV''': it was an inferior good, because people whose income raised, change from a white and black TV to a color one.
Another popular example of low quality is generic brands. These products are often much cheaper than branded products but are often made with the same ingredients or to the same standard of quality. Many generic products come from major brands and are sold under the generic name at a lower price.
* '''Buying properties''': when more people can buy their own homes, demand for privately leased housing declines.
Understanding customer behavior and supply and demand are essential for companies that produce non-standard products. When customers have less disposable income, they are more likely to buy inferior products, which often increases demand. At the same time, demand for these goods is fairly stable in most economic situations. Companies that produce non-standard goods should expect a significant increase in demand for their products during a recession when a large part of the population experiences a significant decline in income.


==Foot notes==
==Foot notes==
<references/>
<references/>
{{infobox5|list1={{i5link|a=[[Veblen effect]]}} &mdash; {{i5link|a=[[Normal good]]}} &mdash; {{i5link|a=[[Substitute goods]]}} &mdash; {{i5link|a=[[Demand]]}} &mdash; {{i5link|a=[[Engel's law]]}} &mdash; {{i5link|a=[[Income effect]]}} &mdash; {{i5link|a=[[Perfectly elastic demand]]}} &mdash; {{i5link|a=[[Prestigious price strategy]]}} &mdash; {{i5link|a=[[Price]]}} }}


==References==
==References==
* Anderton, A. (2004). [https://books.google.pl/books?id=eSrDB3F3W7gC&pg=PA66&dq=examples+inferior+goods&hl=es&sa=X&ved=2ahUKEwiC8ZPvrLj7AhWHz4sKHbwzCukQ6AF6BAgEEAI#v=onepage&q=examples%20inferior%20goods&f=false ''Economics''].Pearson.
* Browning,E.,Zupan, M. (2020).[https://books.google.pl/books?id=uP-9DwAAQBAJ&pg=PA63&dq=inferior+goods&hl=es&sa=X&ved=2ahUKEwjOzKWG0Lr7AhUK_SoKHUiACMEQ6AF6BAgFEAI#v=onepage&q=inferior&f=false ''Microeconomics: Theory and Applications''].Wiley.
* Chaunan, SPS. (2009). [https://books.google.pl/books?id=GLlScXezY1QC&pg=PA199&dq=inferior+good&hl=es&sa=X&ved=2ahUKEwjGkaDd7K37AhUpposKHW_GCeU4FBDoAXoECAcQAg#v=onepage&q=inferior%20good&f=false''MICROECONOMICS: Theory and Applications, Part 1'']. University of Delhi.
* Chaunan, SPS. (2009). [https://books.google.pl/books?id=GLlScXezY1QC&pg=PA199&dq=inferior+good&hl=es&sa=X&ved=2ahUKEwjGkaDd7K37AhUpposKHW_GCeU4FBDoAXoECAcQAg#v=onepage&q=inferior%20good&f=false''MICROECONOMICS: Theory and Applications, Part 1'']. University of Delhi.
* Rittenberg, L. (2012). [https://books.google.pl/books?id=m1hlV358i3AC&pg=PA180&dq=inferior+good&hl=es&sa=X&ved=2ahUKEwjN5OrU7K37AhVT6CoKHXKkDY04ChDoAXoECAIQAg#v=onepage&q=inferior%20good&f=false'' Principles of Microeconomics'']. Flatworld knowledge.
* Lipsey, R., Harbury, C.(2004). [https://books.google.pl/books?id=cV0EZuJxod8C&pg=PA46&dq=examples+inferior+goods&hl=es&sa=X&ved=2ahUKEwiC8ZPvrLj7AhWHz4sKHbwzCukQ6AF6BAgLEAI#v=onepage&q=examples%20inferior%20goods&f=false ''First Principles of Economics''].Oxford University Press.
* Myers, D. (2009). [https://books.google.pl/books?id=ehv9UFkUkVwC&pg=PA61&dq=examples+inferior+goods&hl=es&sa=X&ved=2ahUKEwiC8ZPvrLj7AhWHz4sKHbwzCukQ6AF6BAgCEAI#v=onepage&q=examples%20inferior%20goods&f=false''Constructions Economics: A new approach''].Spon Press.
* Rittenberg, L. (2012). [https://books.google.pl/books?id=m1hlV358i3AC&pg=PA180&dq=inferior+good&hl=es&sa=X&ved=2ahUKEwjN5OrU7K37AhVT6CoKHXKkDY04ChDoAXoECAIQAg#v=onepage&q=inferior%20good&f=false'' Principles of Microeconomics'']. Flatworld [[knowledge]].
* Sampat, M., Mallinath, M., Amitava, G.,(2013).[https://books.google.pl/books?id=iVKja7n06iIC&pg=PA83&dq=Elasticity+inferior+goods&hl=es&sa=X&ved=2ahUKEwijo5_34Lr7AhXRgSoKHdh3DysQuwV6BAgNEAs#v=onepage&q=Elasticity%20inferior%20goods&f=false'' Macroeconomics''].New Delhi.
{{a|Sonia María Soriano Marín}}.
{{a|Sonia María Soriano Marín}}.
[[Category:Production management]]
[[Category:Production management]]

Latest revision as of 23:49, 17 November 2023

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 that can be more varied or of better quality.When the price of an inferior good falls, can happen two things [1]:

  • 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.

At some income levels, a good might be a normal good for a person, but at other income levels, it might be an inferior good. Understanding these traits can aid in evaluating their significance as inferior goods frequently share certain characteristics. For instance, the majority of inferior products fall into a broad category with a few other higher-quality (and more expensive) products. Consider the hamburger: it is a specifically defined good that falls within the broad category of meat. There are various more expensive and higher-quality meat options available, like fillet mignon, prime rib, and veal. It makes sense that some people would eat less hamburger as their wealth increased since they could now acquire better-quality alternatives that nevertheless satisfy the same basic needs but do so more satisfactorily [2].

Difference between Giffen Goods and Inferior goods

The difference between Giffen goods and inferior goods can be established based on the following arguments [3]:

  • Goods whose demand increases when prices rise are called Giffen goods.
  • Goods whose demand decreases when consumer income rises above a certain level are called inferior goods.
  • Giffen goods violate the law of demand, and inferior goods are part of consumer goods and services and are determinants of demand.
  • There are no close substitutes for Giffen goods. On the contrary, inferior goods have better-quality substitutes.
  • When prices fall, the overall price effect of Giffen goods will be negative. On the other hand, the price impact of inferior goods will be positive when prices fall.
  • The demand curve for a Giffen good is positively sloped, whereas the demand curve for an inferior good is negatively sloped.

Characteristics of inferior goods

In economics, inferior goods are characterized by the variation which the demand for these products undergoes according to the income of consumers [4]:

  • Negative income elasticity: An increase in people's income causes a decrease in the quantity demanded of the inferior good, due to this the increase in people's income has a negative income elasticity, the higher a person's budget, the lower the consumption of an inferior good.
  • Positive demand curve: An increase in the price of these goods does not harm demand, which, despite the higher price of commodities, is the cheapest option for lower-income consumers.

Consequently, this demand curve will always be positive, due to the income effect.

Examples of inferior goods

Some examples of inferior goods are [5] [6] [7] :

  • Bread: is a cheap, filling food that consumers switch from to more expensive meat or convenience foods as their incomes rise.
  • Margarine: is a food that consumers switch from margarine to butter, although this has recently become less true due to increased health awareness.
  • Bus transportation: is a service that consumers switch from to their cars when they can afford to purchase a car.
  • Color TV: it was an inferior good, because people whose income raised, change from a white and black TV to a color one.
  • Buying properties: when more people can buy their own homes, demand for privately leased housing declines.

Foot notes

  1. ↑ Rittenberg, L. (2012)p.180
  2. ↑ Browning,E.,Zupan, M.(2020) p.63
  3. ↑ Chaunan, SPS. (2009) p.199
  4. ↑ Sampat, M., Mallinath, M., Amitava, G., (2013) p.84
  5. ↑ Anderton, A. (2004). p. 66
  6. ↑ Lipsey, R., Harbury, C.(2004) p.46
  7. ↑ Myers, D. (2009) p.61


Inferior good — recommended articles
Veblen effect — Normal good — Substitute goods — Demand — Engel's law — Income effect — Perfectly elastic demand — Prestigious price strategy — Price

References

Author: Sonia María Soriano Marín

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