What is an Inferior Good?

Definition: An inferior good is a product that’s demand is inversely related to consumer income. In other words, when consumer income increases, the demand for inferior goods decreases.

What Does Inferior Good Mean?

What is the definition of inferior goods? A common misconception is that inferior goods are simply junkie products that people don’t want. This isn’t true at all. IG can be expensive or inexpensive and can be quality or junkie products. Inferior simply means that consumers with more money typically purchase less of these products. In some cases, IG can have better quality substitutes that consumers prefer when their income increases, but not always. For instance, when people have less income, they eat at fast food restaurants. When their income increases, they prefer to eat out at better, fancier restaurants.

Therefore, fast food could be considered an IG. These goods are products or services that consumers prefer less of as they make more money. During a recession, though, the demand for inferior goods typically increases because consumer income usually falls during a recession.

Let’s look at an example.


A classic example of inferior good is public transportation. When consumer income is low, people use the bus. If the economy grows and consumer income increases, people stop using the bus and buy cars instead. It makes sense to use the bus when people cannot afford a taxi or a car. But when they can afford a car, they stop using the bus.

Another example is the “value for money” goods that the supermarkets usually have in the store’s entrance. These goods are inferior because when consumer income is low, people buy the “2 for 1” goods to save money. However, once their income increases, the demand for these value goods declines.

The same is true for the supermarket generic brand goods. These goods are always cheaper than the name brand products and consumers prefer them when they cannot afford highly established brands. Yet, when their income increases, consumers tend to purchase the name brand products instead of the generics.

As far as the fast food is concerned, keep in mind that it is considered an inferior good mainly in the western countries. However, for the economies of the East, fast food is a normal good.

Summary Definition

Define Inferior Good: Inferior goods are products or services that increase in demand as consumer income decreases and vice versa.