Inferior Goods
When we tackle the demand curve and the various determinants of demand, one of the influences we discuss is that of income. In a normal good, when income goes up demand for that good goes up. So demand for dinners at nice restaurants would be expected to rise as the economy (and people’s incomes) rises.
There are exceptions to this and one class of them is called “inferior goods.” Demand for these goods declines as income rises. Keeping with the restaurant theme, demand for McDonald’s meals might go down as incomes rise and people substitute away from fast food to a more relaxed setting.
In the Freakonomics blog today there is another “tasty” example of inferior goods – the demand for rat meat in Cambodia. Now that you’re curious, read more here…
I teach principles of economics courses and a course in the economics of healthcare at Southern Oregon University.
