Question

Demand & Supply

What is an inferior good in economics?

write 200 words

Answer 1

Solution: An inferior good is a type of good whose demand decreases when the income of the consumer increases. These are the goods that the consumer may prefer less as their income gets increased. An inferior good is exactly the opposite of the normal good in which the demand increases as the consumer income increases.

For example Coffee can be an inferior good because when the consumer incomes are not increased, people may prefer to buy coffee from local outlets or not so expensive coffee shops whereas when the income of the consumer increases, the same consumer will be able to afford high-priced coffee at reputed shops and hence for him/her the coffee at the not so expensive shops will be an inferior good.

Another example for inferior good may be that when the consumer incomes are low, people prefer to travel by metro, bus or any public transportation facility whereas when incomes experience a raise, the same consumer can afford to purchase a car and he would prefer to travel by his/her own car. Therefore public transport is now an inferior good to him because his income is increased.

However it's up to the consumers if they wish to upgrade themselves and want to purchase more costly items than before when their income rises. Some of the consumers may continue to purchase the inferior goods even when their incomes are increased.