Definition
- Inferior good
- An inferior good is one for which the quantity demanded falls as income rises and rises as income falls, so its income elasticity is negative.
Example
Can you think of an example of inferior good?
Incomes rise 10 per cent and local bus journeys fall 4 per cent, an income elasticity of −0.4, as people who can now run a car stop taking the bus.
Test yourself
Can you name the six types of good you can label from income and cross elasticity?