What is an inferior good?

“Inferior good” is an economic term for good people who buy less when their incomes rise. As incomes rise and the economy improves, people stop buying these things and buy more expensive alternatives.

How to Understand Bad Things

The desire for less-than-perfect goods decreases when income rises or the economy improves. People will be more willing to pay for more expensive alternatives when this happens. This change might be due to quality issues or changes in the socioeconomic position of the consumers.

Inferior goods are things that people would buy less of if they had more real income. They are the opposite of everyday goods. Also, they might be linked to people who are usually from a lower social class.

On the other hand, when incomes drop or the economy shrinks, people buy more of the less desirable things. This makes cheaper things a better option than more expensive ones.

The word “inferior good” refers to how cheap it is, not how good it is, though some inferior goods may be worse in quality.

Bad Examples of Good

There are a lot of cases of harmful goods. Some of us may be more familiar with the cheap products we use daily, like instant noodles, hamburgers, canned goods, and frozen dinners. People often buy these things when they don’t have much money. However, they often trade these for more expensive things when their wages increase.

Food

Food is a necessity that must always be bought, so groceries are among the most common examples of harmful goods. But the amount of food that people buy may be different. Instead of a steak for dinner, someone might choose something less good, like canned meat or frozen food.

People may also be put into different groups based on how they eat. People may be less likely to eat out, especially at fancier places, in favor of cheaper ways to get food, like making their meals home. One way is just a better alternative to the other.

Getting around and traveling

As an example of a lousy good, we can also use transportation. People with low means may choose to take the bus or train. When their wages go up, they might stop taking the bus and buy cars or take cabs instead. Buying a car may also be put into different categories. For example, a used Honda may be less desirable than a new Tesla.

Along with daily transportation, many other parts of travel can be seen as better or worse. Consider the hotel you might stay at based on your current financial situation. You could also go to different shows or fly first class instead of choosing cheaper, less comfortable travel methods.

Brand names

A coffee from McDonald’s might not be as good as a coffee from Starbucks. If a person’s income decreases, they might switch from their daily Starbucks coffee to the cheaper coffee at McDonald’s. If a person’s income goes up, on the other hand, they might switch from McDonald’s coffee to more expensive Starbucks coffee.

A different product type is a generic food like peanut butter or cereal from the grocery store. People with lower incomes may buy these cheaper generic-brand products. When their incomes rise, they may switch to name-brand goods. Products from the grocery store are an excellent example of how inferior things are not always of lower quality. Many of these items are from the same line as the more expensive name-brand items.

Not-So-Great Products and How People Act

Most of the time, buyer behavior determines the demand for inferior goods. Most of the time, people with smaller incomes or when the economy is shrinking are the ones who buy cheaper goods. But that doesn’t always happen. It’s possible that some customers won’t change their ways and will keep buying harmful products.

Take the example of a customer who gets a raise at work. Even though they have more money, they might still buy coffee from McDonald’s instead of Starbucks because they like it better, or they might find that a cheaper store-brand product is better than a more expensive name-brand product. It’s just a matter of personal taste in this case.

Bad things aren’t always the same in different parts of the world. If you live in the U.S. and think fast food is bad, people in poor countries might think it’s regular. A typical good has a positive income elasticity of demand, meaning people want it more when their wages go up.

A negative income elasticity is linked to harmful goods, while a positive income elasticity is linked to good goods.

Different Kinds of Goods

The Giffen Goods

Giffen goods are rare types of harmful goods that don’t have a ready-made replacement, like potatoes, rice, and bread. The only thing that differentiates Giffen goods from regular poor goods is that people buy more of them even when the prices go up, no matter how much money they have.

Many of Giffen’s products are necessities, especially in places where people are poor. People who buy Giffen things have no choice but to spend more on them when prices increase. They may have to buy more rice, even if it costs more because that’s all they can afford. On the other hand, things like meat become treats because they are too expensive and complicated to get.

Everyday Goods

A normal good is the same thing as a poor good. Demand for everyday things goes up when people’s incomes rise. Ordinary things are also known as essential goods. Organic bananas are a good example. People who don’t make much money might buy regular bananas. If their salaries go up and they get a little extra money every month, they might buy organic bananas. Clothing, water, beer, and booze are some other examples.

High-end goods

The third group is luxury goods. They are not the basics or things you need to live. People want these things and can buy them when their income increases. Put another way, a person’s ability to buy luxury things depends on how much money they have. Some examples of luxury things are cleaning and cooking services, handbags and luggage, cars, and haute couture.

Goods by Veblen

A Veblen good is a different kind of sound. If the price of an item goes up, it might sell more; this is called a Veblen good. Most of the time, these kinds of goods are a subset of luxury goods, which often go against many basic economic ideas. Take, for instance, a $100 piece of art. If the artwork is worth $1 million, more investors should be interested because it has a higher possible value.

Does lousy quality come with a lousy product?

Not all the time. That thing that people want less of as their income rises is called an “inferior good” in economics. We can say that things with negative price elasticity are inferior, but this doesn’t always mean they are lower quality. People who make more money tend to buy more normal or luxury things instead of cheap ones as their income rises.

What are some examples of goods that are not as good?

“Store-brand” shopping items, instant noodles, and some canned or frozen foods are all common examples of poor-quality goods. Some people strongly prefer these things, but most buyers would buy more expensive alternatives if they had the money. So, when people’s incomes increase, they buy fewer things.

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

Giffen goods are named after the Scottish economist Sir Robert Griffin. They are goods that people want more of even if the price goes up, mainly because there aren’t many other options. A standard example of a Giffen Good is an essential food everyone needs, like rice. People will keep buying the basics even if it costs more if they have no other choice. They will buy more Giffen goods even if the prices go up because they will have to spend a significant chunk of their income on them. This is because they can’t afford slightly more expensive options anyway.

Are goods that aren’t good bad?

Some inferior goods aren’t necessarily wrong; they’re just a cheaper way to do the same thing. Do not get a fancy meal delivered. Instead, make a simple meal at home. When people have more money, they don’t want to buy as many inferior things.

Conclusion

• A lousy good is one that people buy less of when their incomes go up.
• When incomes are low, or the economy is shrinking, cheaper things can be used instead of more expensive ones.
• Buying inferior goods could be a brand of goods, an item you buy, or an example of something happening (like taking the bus vs. driving a new car).
• Everyday goods, whose desire increases even when incomes increase, are the opposite of inferior goods.
• Luxury goods, usually better-quality items sold for more money than they’re worth, are also inferior goods.