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Inferior goods
#cfa #cfa-level-1 #economics #microeconomics #reading-13-demand-and-supply-analysis-introduction #study-session-4
For some goods, there is an inverse relationship between quantity demanded and consumer income. That is, when people experience a rise in income, they buy absolutely less of some goods, and they buy more when their income falls. Hence, income elasticity of demand for those goods is negative. By definition, goods with negative income elasticity are called inferior goods .
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4.3. Income Elasticity of Demand: Normal and Inferior Goods
that the demand for that particular good rises when income increases and falls when income decreases. Hence, if we find that when income rises, people buy more meals at restaurants, then dining out is defined to be a normal good. <span>For some goods, there is an inverse relationship between quantity demanded and consumer income. That is, when people experience a rise in income, they buy absolutely less of some goods, and they buy more when their income falls. Hence, income elasticity of demand for those goods is negative. By definition, goods with negative income elasticity are called inferior goods . Again, the word inferior means nothing other than that the income elasticity of demand for that good is observed to be negative. It does not necessarily indicate anything at all about t


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