Inferior Goods

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Definition: Inferior Goods

Inferior goods are those goods whose demand decreases as income of consumer increases and vice-versa.

Here, inferiority of goods refer to affordability and not to inferior quality of goods. Inferior goods are opposite of superior goods that are related to wealth and wealthy consumers. Inferior Goods are affordable goods so it is more related to lower socio-economic groups. As income of consumers increase, consumers move to superior goods from inferior goods and that is why demand of inferior goods decreases.

In Microeconomics, inferior goods are characterized by income elasticity of goods. Income elasticity is defines as change in demand of goods per unit change in income of consumer. In case of inferior goods, as income of consumer increses, demand of good decreses so income elasticity of inferior goods is negative.

Examples of inferior goods are second hand car, municipal bus service, payday lending etc. Those who use second hand car, as their income increase they will want to buy brand new car and emand for second hand car will decrease. Same with municipal bus service that as income of consumers increases, they will want rapid transport system that can reduce the tavel time. So demand of bus service will decrease.



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