• A. Whose quality is low
  • B. Consumed by very poor people
  • C. Whose consumption falls when cunsumers’ income rises ✓
  • D. Which satisfy only the basic needs
  • E. None of the above


In economics, inferior goods are referred to as goods that experience an increase in demand when consumer incomes fall, and a decrease in demand when consumer incomes rise. This is in contrast to normal goods, for which demand increases as consumer incomes rise. Inferior goods are typically associated with lower-income individuals who may switch to higher-quality alternatives as their income increases.

Characteristics of Inferior Goods:

  1. Income Effect: The income effect of inferior goods is negative, meaning that as consumers’ incomes increase, they tend to shift away from consuming these goods towards superior alternatives.
  2. Substitution Effect: Inferior goods often have readily available substitutes that consumers can switch to when their income rises. This makes them different from Giffen goods, which do not have easily substitutable alternatives.
  3. Examples: Common examples of inferior goods include generic brands, public transportation, and certain fast-food items. These goods are often seen as necessities for lower-income individuals but may be replaced by higher-quality options as income levels improve.

Significance in Economics:

Understanding the concept of inferior goods is important in analyzing consumer behavior and market dynamics. It helps economists predict how changes in income levels can impact the demand for different types of goods and services. Additionally, the study of inferior goods contributes to a deeper understanding of price elasticity and consumer preferences.

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