Inferior good

Inferior good


Good Y is a normal good since the amount purchased increases from Y1 to Y2 as the budget constraint shifts from BC1 to the higher income BC2. Good X is an inferior good since the amount bought decreases from X1 to X2 as income increases.

In consumer theory, an inferior good is a good that decreases in demand when consumer income rises, unlike normal goods, for which the opposite is observed.[1] Normal goods are those for which consumers' demand increases when their income increases. [2] Inferiority, in this sense, is an observable fact relating to affordability rather than a statement about the quality of the good. As a rule, these goods are affordable and adequately fulfil their purpose, but as more costly substitutes that offer more pleasure (or at least variety) become available, the use of the inferior goods diminishes.

Depending on consumer or market indifference curves, the amount of a good bought can either increase, decrease, or stay the same when income increases.

Examples

Cheaper cars are examples of the inferior goods. Consumers will generally prefer cheaper cars when their income is constricted. As a consumer's income increases the demand of the cheap cars will decrease, while demand of costly cars will increase, so cheap cars are inferior goods. Inter-city bus service is also an example of an inferior good. This form of transportation is cheaper than air or rail travel, but is more time-consuming. When money is constricted, travelling by bus becomes more acceptable, but when money is more abundant than time, more rapid transport is preferred.

Inexpensive foods like bologna, hamburger, mass-market beer, frozen dinners, and canned goods are additional examples of inferior goods. As incomes rise, one tends to purchase more expensive, appealing and nutritious foods[citation needed]. Likewise, goods and services used by poor people for which richer people have alternatives exemplify inferior goods. As a rule, used and obsolete goods (but not antiques) marketed to persons of low income as closeouts are inferior goods at the time even if they had earlier been normal goods or even luxury goods.

Others are very inconsistent across geographic regions or cultures. The potato, for example, generally conforms to the demand function of an inferior good in the Andean region where the crop originated. People of higher incomes and/or those who have migrated to coastal areas are more likely to prefer other staples such as rice or wheat products as they can afford them. However, in several countries of Asia, such as Bangladesh, potato is not an inferior good, but rather a relatively expensive source of calories and a high-prestige food, especially when eaten in the form of "French fries" by urban elites.[3]

Some inferior goods are so consistent that they can be seen as economic indicators. One such is instant noodles, where an early 2005 increase in the Thai "Mama Noodles Index" (the number of the popular Mama-brand instant noodles sold in that country) was seen as a sign of weakness after about ten years of stability.

Recently, there has been some interest in cataloging and identifying inferior goods in the United States. One such project, developed by economist.com, seeks to document characteristics that would identify goods as inferior. In 1997, several Michigan scholars from Western Michigan University identified many commonplace grocery store goods as inferior. Some of the goods identified as inferior goods are:

Giffen goods

A special type of inferior good may exist known as the Giffen good, which would disobey the "law of demand". Quite simply, when the price of a Giffen Good increases, the demand for that good increases. This would have to be a good that is such a large proportion of a person or market's consumption that the income effect of a price increase would produce, effectively, more demand. The observed demand curve would slope upward, indicating positive elasticity.

References


Wikimedia Foundation. 2010.

Игры ⚽ Нужно сделать НИР?

Look at other dictionaries:

  • Inferior Good — A type of good for which demand declines as the level of income or real GDP in the economy increases. This occurs when a good has more costly substitutes that see an increase in demand as the society s economy improves. An inferior good is the… …   Investment dictionary

  • inferior good — merchandise that in low demand when income rises …   English contemporary dictionary

  • inferior good — noun : a commodity the consumption of which decreases as its price declines or as the income of consumers rises because of the increased income available to buy preferred though more expensive commodities …   Useful english dictionary

  • Good (economics) — Types of goods in economics. In economics, a good is something that is intended to satisfy some wants or needs of a consumer and thus has economic utility. It is normally used in the plural form goods to denote tangible commodities such as… …   Wikipedia

  • inferior — is not a true comparative (like lower, for example) and is followed by to, not than: • When we are together there s no competition; neither of us feels better than or inferior to the other J. Dawson, 1990. When used attributively (before a noun) …   Modern English usage

  • inferior — [adj1] less in rank, importance back seat*, bottom, bottom rung*, entry level, junior, less, lesser, lower, menial, minor, minus, nether, peon, second, secondary, second banana*, second fiddle*, second string*, smaller, subjacent, subordinate,… …   New thesaurus

  • inferior — I UK [ɪnˈfɪərɪə(r)] / US [ɪnˈfɪrɪər] adjective * 1) not as good as someone or something else It produces photographs of inferior quality. inferior to: This design is inferior to the one the German company proposed. an inferior student a) if… …   English dictionary

  • inferior — in|fe|ri|or1 [ ın fıriər ] adjective * 1. ) not as good as something else: It produces photographs of inferior quality. inferior to: This design is inferior to the one the German company proposed. a ) if something is inferior, its quality is not… …   Usage of the words and phrases in modern English

  • inferior — in|fe|ri|or1 [ınˈfıəriə US ˈfıriər] adj [Date: 1400 1500; : Latin; Origin: lower , from inferus below ] 1.) not good, or not as good as someone or something else ≠ ↑superior ▪ I felt very inferior among all those academics. ▪ wine of inferior… …   Dictionary of contemporary English

  • inferior — 1 adjective 1 not good, or less good in quality, value, or skill than someone or something else: I felt very inferior among all those academics. | Pay less, and you get an inferior product. (+ to): This machine is technically inferior to Western… …   Longman dictionary of contemporary English

Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”