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HomeHomework HelpeconomicsExample of Inferior Good

Example of Inferior Good

An inferior good is a type of good whose demand increases when consumer incomes fall, and decreases when incomes rise. This is because consumers tend to buy less expensive alternatives when they have less money.

beginner
1 hour
Economics
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Overview

Inferior goods are an important concept in economics, representing products that see increased demand when consumer incomes decline. This behavior is driven by the income effect, where consumers opt for cheaper alternatives during tough financial times. Understanding inferior goods helps in analyzin...

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Key Terms

Inferior Good
A good whose demand increases as consumer income decreases.

Example: Generic brands of food.

Normal Good
A good whose demand increases as consumer income increases.

Example: Brand-name clothing.

Demand Curve
A graph showing the relationship between the price of a good and the quantity demanded.

Example: A downward sloping line on a graph.

Income Effect
The change in demand for a good resulting from a change in consumer income.

Example: Buying more instant noodles when income decreases.

Substitution Effect
The change in demand for a good due to a change in the price of a substitute good.

Example: Choosing tea over coffee when coffee prices rise.

Consumer Preferences
The subjective tastes and preferences of consumers that influence their purchasing decisions.

Example: Preferring organic food over processed food.

Related Topics

Normal Goods
Goods that see increased demand as consumer income increases.
beginner
Consumer Behavior
The study of how individuals make decisions to spend their resources.
intermediate
Demand Elasticity
How sensitive the quantity demanded is to a change in price.
intermediate
Market Structures
Different types of market environments that affect pricing and competition.
advanced

Key Concepts

inferior goodsconsumer behaviordemand elasticityincome effect