Inferior goods

In economics, inferior goods are any goods for which demand decreases when income increases. The term does not refer to the quality of the good.

A commonly used example is intercity bus service. Those with more money will fly, or take the train.

Depending on the indifference curves, the amount of a good bought can either increase, decrease, or stay the same when income increases. In the diagram below, good Y is a normal good since the amount purchased increases from Y1 to Y2 as the budget constraint shifts from BC1 to the higher income BC2. Good X is an inferior good since the amount bought decreases from X1 to X2 as income increases.

See also normal goods, giffen goods, consumer theory