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Question

Give the meaning of "inferior" good and explain the same with the help of an example.

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Solution

Inferior goods refer to those goods that share an inverse relationship with the income of a consumer. As income increases, the demand for inferior goods fall and vice-versa. This is because with an increases in the income, the consumer tends to shift his/her demand to superior quality goods, thereby reducing the demand for inferior goods. For example, coarse cereals can be considered as inferior goods.
A good can be normal of inferior depending on the level of the consumer's income. For instance, at a very low of income, coarse cerealas may be a normal good. However, at higher income levels,ceteris paribus, coarse will ba an inferior good because with an increase in income, a consumer will reduce his/her consumption of inferior cereals and it will be substituted by superior ones.

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