Inferior Good

"Inferior" does not mean poor quality. It means that people tend to buy less of the product as they become better off, usually because they switch to more expensive alternatives they prefer.

Common examples include supermarket own-brand basics, instant noodles, second-hand clothes and long-distance bus travel. When incomes rise, people may switch to branded products, fresher food, new clothes or train and air travel. When incomes fall, they switch back.

Inferior goods have a negative income elasticity of demand. For example, if incomes rise by 10% and demand for a budget brand falls by 4%, its income elasticity is −0.4.

Businesses that sell inferior goods may see sales rise during recessions, as more people look for cheaper options. Discount retailers, for example, often gain customers when the economy weakens.

Whether a good is inferior depends on the people and the situation. Public transport may be an inferior good in one city, where people switch to cars as they get richer, and a normal good in another, where it is fast and convenient.