Tax Troubles? We've Got You Covered!
Tax Advisory Services
Get Expert Consultation Now!
  • 2500 Cr. Saved Already!
  • Trusted by 1 Million+
  • 10+ Yr. of Industry Experience
Tax Advisor

Inferior Goods

What are inferior goods?

Inferior goods are a specific kind of good that sees reduced demand when consumers experience a rise in their income or when the economy expands, leading to an overall increase in the population's earnings.

Typically, individuals in the lower socio-economic brackets tend to consume these inferior goods. It's important to note that while these goods are commonly associated with people of modest means, their quality isn't inherently low. In fact, some of these goods might possess good quality but are accompanied by more expensive alternatives. What makes these goods appealing to those with lower incomes is their affordability factor.


Understanding Inferior Goods

Inferior goods are essential products that people tend to give up as their income rises or their economic situation improves. Inferior goods are not necessarily of low quality. Instead, it highlights the shift in what people choose to buy when their incomes boost, often leading them to opt for more budget-friendly alternatives.

Interestingly, what might be considered an inferior product for one group can be a regular choice for another group simultaneously. Generally, individuals with lower incomes are the ones who go for these products. However, it's important to remember that whether a product is seen as normal or inferior depends on people's spending abilities and their personal preferences. Inferior goods are one of the four categories that include normal goods, Giffen goods, and luxury goods.


Example of Inferior Goods

Budget Groceries: Frozen, canned foods, instant noodles, and other low-cost items are examples of affordable groceries favored by those with limited income. When earnings increase, preferences often shift toward fresher, organic, or premium food choices.

Fast Foods: Fast food, high in calories but low in nutrition, becomes a common choice when funds are tight. As finances improve, people opt for healthier, more diverse options like dining out or home-cooked meals.

Public Transport: Public transport, more accessible for those with lower incomes, may lose out on convenience and safety compared to cars or ride-sharing. With more money, alternate modes of travel gain favor.

Generic  Brands: Cheaper stores or generic brands, while less distinct, could be preferred when money is scarce. With increased income, branded items with added features gain appeal.

Payday Loans: Payday loans, though high-cost and risky, are often used by low-income individuals. Improved finances lead to wiser credit choices, moving away from these loans