What are Inferior Goods?


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These are goods for which an increase in consumer incomes results in a decrease in demand.  These are goods consumed when one’s income is low.  When income increases, instead of increasing the consumption of such products he switches to substitutes of a higher quality which he may not have been able to afford before the increase in income e.g. from plastic to leather shoes, from a second hand car to a new car. If the price of an inferior good falls, the effect is to increase the real income of the consumer.  The consumer is likely to spend less income for the same amount of inferior good he needed before and he might use the extra income for other commodities which he could not have afforded before the price fall.

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