Inferior Goods

Course Outline

Dictionary of Economics

Course (113 videos)

Inferior Goods

What is an inferior good?

An inferior good is a good or service where your demand goes down when your income goes up, and vice versa.

Let’s consider a familiar example: food.

When you’re a college student, your income is typically very low. But you still have to eat! You just may not be eating the fanciest meals, instead opting for inexpensive restaurants like McDonald’s. Or heating up a cup of instant noodles in your dorm.

However, once you graduate and your income increases, your meal choices will likely change. Your demand for Double Cheeseburgers and Top Ramen will probably decrease.

Demand for inferior goods is also likely to change as an economy moves through business cycles. In the video, we’ll test your knowledge by exploring how demand shifts for inferior goods during economic booms and recessions.

Want to learn more about demand and how people make choices about consumption? Check out our Micro sections on Supply, Demand, and Equilibrium and Consumer Choice.

Teacher Resources


What is an inferior good? An inferior good is a good or service where your demand goes down when your income goes up, and vice versa. 

For example, when you're a student, and not making much money, you might eat at McDonald's a lot, because it's cheap. But when you graduate, and your income increases later, you then eat at McDonald's less often, and instead go to better, more expensive restaurants. 

Let's look closer at a specific example. We're going to think about the demand for ramen, and we're going to think about it in two different situations -- namely, during a boom and during a recession. Here's our demand for ramen. What's going to happen to this demand when the economy goes into a boom, when people's incomes go up? So we'll draw this new demand curve. 

What's the new demand curve going to look like? Well, in a boom, the demand for ramen is going to decrease, because ramen is an inferior good -- so we get a decrease in demand. What about in a recession? Of course, in a recession, we get the opposite. In a recession, when incomes are going down, the demand for ramen is going up. Now, inferior goods are not the only types of goods.


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