Question

Give the meaning of "inferior" good and explain the same with the help of an example.

Answer 1

Inferior goods are goods which have a negative relationship between income and quantity demanded. Assume that other things remaining constant, an increase in the consumer’s income will lead to a decrease in the quantity demanded and a decrease in the consumer’s income will lead to an increase in the quantity demanded. For example, if the income of the consumer increases, he/she will prefer to replace the consumption of boiled rice with basmati rice, then the demand for boiled rice will decline. Here boiled rice is an inferior good.

Income of the consumer is given on the Y-axis and the demand for boiled rice is given on Xaxis. If the income of the consumer increases from OY to OY₁, the demand for boiled rice will decline from OQ to OQ1 because of the consumer shifts to basmati rice the superior good with the increased income