Inferior Goods
Course Outline
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.
Related Resources
Related Videos
Teacher Resources
Related to this video
Transcript
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.
Subtitles
Thanks to our awesome community of subtitle contributors, individual videos in this course might have additional languages. More info below on how to see which languages are available (and how to contribute more!).
How to turn on captions and select a language:
- Click the settings icon (⚙) at the bottom of the video screen.
- Click Subtitles/CC.
- Select a language.
Contribute Translations!
Join the team and help us provide world-class economics education to everyone, everywhere for free! You can also reach out to us at [email protected] for more info.
Submit subtitles
Accessibility
We aim to make our content accessible to users around the world with varying needs and circumstances.
Currently we provide:
- A website built to the W3C Web Accessibility standards
- Subtitles and transcripts for our most popular content
- Video files for download
Are we missing something? Please let us know at [email protected]
Creative Commons
This work is licensed under a Creative Commons Attribution-NoDerivatives 4.0 International License.
The third party material as seen in this video is subject to third party copyright and is used here pursuant
to the fair use doctrine as stipulated in Section 107 of the Copyright Act. We grant no rights and make no
warranties with regard to the third party material depicted in the video and your use of this video may
require additional clearances and licenses. We advise consulting with clearance counsel before relying
on the fair use doctrine.