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What Are Inferior Goods?

In economics, when the demand for items decreases as the consumer income increases, those items are considered a inferior goods. This term is used in comparison with normal goods, which increases in demand in proportion to the increase in consumer income. In this context, the term inferior is not used to refer to the quality of the goods. Instead it relates more to the economic value, or affordability, of the goods. The concept is that when the consumer income increases, the consumer finds more alternatives that provide more satisfaction - albeit more costly - compared to the inferior goods.

A common example of inferior goods is public transportation. At the outset, people prefer to use public transportation as it is cheap and does the job of taking you from point A to point B. As their income increases, they may switch to their own private cars - a more costly alternative - with the rationale being that having your own car is more convenient. The average person will buy an affordable vehicle for the first time, but as his income increases again over time, he might opt for a more expensive make and model. In this case, the first - cheap - car becomes part of the inferior goods label.

Inferior goods are also found in the food sector. Cheap items, which are often less nutritious and appealing, can be considered inferior goods. Processed meats, instant noodles, and canned goods are examples of inferior goods. As the income of an individual rises, he will tend to go for better food items that may cost more, but provide more pleasure even though they may be more costly.

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