Definition, Examples, and Role of Consumer Behavior

What Is an Inferior Good?

An inferior good is an financial time period that describes a superb whose demand drops when individuals’s incomes rise. These items fall out of favor as incomes and the economic system enhance as shoppers start shopping for extra expensive substitutes as a substitute.

Key Takeaways

  • An inferior good is one whose demand drops when individuals’s incomes rise.
  • When incomes are low or the economic system contracts, inferior items turn out to be a extra reasonably priced substitute for a dearer good.
  • Inferior items could consult with the model of merchandise bought, objects bought, or occasion of how one thing happens (i.e. taking a bus vs. driving a brand new automotive).
  • Inferior items are the alternative of regular items, whose demand will increase even when incomes enhance.
  • Inferior items additionally oppose luxurious items, objects of upper high quality typically offered at a premium that aren’t wanted.

Understanding Inferior Items

In economics, the demand for inferior items decreases as revenue will increase or the economic system improves. When this occurs, shoppers will likely be extra prepared to spend on extra expensive substitutes. A number of the causes behind this shift could embody high quality or a change to a client’s socio-economic standing.

Inferior items, that are the alternative of regular items, are something a client would demand much less of if they’d the next stage of actual revenue. They might even be related to those that sometimes fall right into a decrease socio-economic class.

Conversely, the demand for inferior items will increase when incomes fall or the economic system contracts. When this occurs, inferior items turn out to be a extra reasonably priced substitute for dearer items.

The time period “inferior good” refers to affordability, fairly than high quality, though some inferior items could also be of decrease high quality.

Inferior Good Examples

There are various examples of inferior items. A few of us could also be extra acquainted with among the on a regular basis inferior items we come into contact with, together with instantaneous noodles, hamburgers, canned items, and frozen dinners. When individuals have much less cash, they have an inclination to purchase these sorts of merchandise. However when their incomes rise, they typically give these up for dearer objects.


Groceries are among the many most typical examples of inferior merchandise as a result of meals is a necessity that should at all times be acquired. Nevertheless, the extent at which shoppers by meals could range. Versus consuming a steak for dinner, a person could go for an inferior product akin to canned meat or frozen meals.

As well as, the way in which people devour meals could also be labeled in a different way. People could also be much less prone to eat out, particularly at fancier eating places, in favor of inferior strategies of getting meals ready akin to getting ready the meal at residence on their very own. One technique is solely a superior substitute for the opposite.


We are able to additionally flip to transportation for example of an inferior good. When individuals’s incomes are low, they might decide to experience public transport. When their incomes rise, they might cease driving the bus and, as a substitute, take taxis and even purchase automobiles. As well as, shopping for a car could also be labeled on totally different tiers, as a used Honda could also be thought of inferior to a brand new Tesla.

Together with on a regular basis transportation, many features of journey could also be thought of a superior or inferior items. Contemplate the lodge chances are you’ll keep at primarily based on how your private funds are doing. You might also select to attend totally different leisure occasions or fly first-class versus opting to cheaper, inferior journey choices.


A McDonald’s espresso could also be an inferior good in comparison with a Starbucks espresso. When a client’s revenue drops, they might substitute their every day Starbucks java for the extra reasonably priced McDonald’s brew. Then again, when a client’s revenue rises, they might substitute their McDonald’s espresso for the dearer Starbucks espresso.

Different examples of an inferior good are no-name grocery retailer merchandise akin to cereal or peanut butter. Customers could use these cheaper generic model merchandise when their incomes are decrease, and make the change to name-brand merchandise when their incomes enhance. Grocery retailer model merchandise present an insightful instance of how inferior items are usually not essentially of decrease high quality. Many of those items come from the identical product line because the dearer name-brand items.

Inferior Items and Shopper Habits

Demand for inferior items is usually dictated by client conduct. Sometimes, demand for inferior items is principally pushed by individuals with decrease incomes or when there is a contraction within the economic system. However that is not at all times the case. Some prospects could not change their conduct and proceed to buy inferior items.

Contemplate a client who will get a elevate from their employer. Regardless of the rise in revenue, they might proceed to purchase McDonald’s espresso as a result of they like it over Starbucks’ brew, or they could discover a no-name grocery product higher than the dearer name-brand counterpart. On this case, it is only a matter of private desire.

Inferior items aren’t at all times the identical in numerous elements of the world. For instance, one thing so simple as quick meals could also be thought of an inferior good within the U.S., however it might be deemed a standard good for individuals in creating nations. A traditional good is one whose demand will increase when individuals’s incomes begin to enhance, giving it a optimistic revenue elasticity of demand.

Inferior items are related to a unfavorable revenue elasticity, whereas regular items are associated to a optimistic revenue elasticity.

Varieties of Inferior Items

Giffen Items

Giffen items are uncommon types of inferior items that don’t have any prepared substitute or various, akin to bread, rice, and potatoes. The one distinction between Giffen items and conventional inferior items is that demand for the previous will increase even when their costs rise, no matter a client’s revenue.

Many Giffen items are thought of staples, particularly in areas the place individuals stay in a decrease socio-economic class. When the costs of Giffen items enhance, shoppers don’t have any selection however to spend a bigger amount of cash on them. So they might spend extra money on rice as a result of that is all they’ll afford to purchase—even when the value retains rising. Merchandise akin to meat, alternatively, turn out to be luxuries, as they’re far too unaffordable and out of attain.

Regular Good

An inferior good is the alternative of a standard good. Regular items expertise a rise in demand when incomes enhance. Regular items are additionally referred to as obligatory items. An instance is natural bananas. If a client’s revenue is low, they might purchase common bananas. If their incomes rise and so they have a number of additional {dollars} to spend every month, they might select to purchase natural bananas. Different examples embody clothes, water, and beer, and alcohol.

Luxurious Good

Luxurious items are the third class. They aren’t deemed necessities or requirements to stay. These items are extremely desired and may be bought when a client’s revenue rises. In different phrases, the flexibility to buy luxurious items depends on a client’s wealth or belongings. Luxurious objects embody cleansing and cooking companies, purses and baggage, sure cars, and high fashion.

Veblen Good

One other differing sort of excellent is a Veblen good. A Veblen good is an merchandise whose enhance in worth may very well lead to larger gross sales. A lot of these items are sometimes a subset of a luxurious good, and such a good typically defies many conventional ideas of economics. For instance, think about a bit of art work that sells for $100. Ought to the art work truly be valued at $1 million, principle holds that extra buyers could be curiosity as there’s better potential worth.

Do Inferior Items Have an Inferior High quality?

Not essentially. “Inferior good” is an financial time period that refers to an merchandise that turns into much less fascinating because the revenue of shoppers will increase. In different phrases, inferior items are these whose worth elasticity is unfavorable, however this does not at all times contain a decrease high quality. As shoppers’ incomes enhance, they have an inclination to lower their purchases of inferior items, choosing regular items or luxurious items as a substitute.

What Are Some Examples of Inferior Items?

Typical examples of inferior items embody “store-brand” grocery merchandise, instantaneous noodles, and sure canned or frozen meals. Though some individuals have a particular desire for this stuff, most consumers would favor shopping for dearer options if they’d the revenue to take action. Due to this fact, when incomes rise, demand for this stuff tends to lower accordingly.

What’s the Distinction Between a Giffen Good and an Inferior Good?

The time period Giffen items, named after the Scottish economist Sir Robert Griffin, refers to items whose demand will increase even when costs rise, largely as a result of there are few substitutes or options for them. A basic instance of a Giffen Good could be a primary meals staple, akin to rice. If shoppers don’t have any selection however to buy the staple, they’ll proceed to take action, even when it turns into dearer. In truth, as a result of these purchases will devour a better share of their revenue, demand for Giffen items will truly enhance with larger costs: The bounds on disposable revenue make barely larger choices much more out of attain.

Are Inferior Items Dangerous?

Inferior items aren’t essentially dangerous; they merely characterize a extra economical manner of attaining the identical purpose. As an alternative of a catered fancy meal, it’s not dangerous to make a easy meal at residence. Inferior items characterize objects that merely in much less demand as individuals have extra disposable revenue.

The Backside Line

An inferior good is an merchandise that’s typically a substitute product whose demand drops when individuals’s revenue will increase. Throughout financial prosperity, shoppers could also be extra prone to spend money on extra luxurious items. If a client’s revenue drops, they’re extra prone to resort to actions akin to shopping for decrease high quality objects, generic manufacturers, avoiding touring, or altering consuming habits.

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