Doing Less with More

However, not all goods react in a positive way to income. For inferior goods, an increase in income results in a decrease in demand.

An inferior good is not necessarily a good that is defective or made with "inferior" materials. It is so named because it tends to be less expensive than other more desirable goods. As such, when buyers have more income and can afford to buy the more expensive products, they tend to reduce their purchases of the inferior goods.

Consider this illustration of an inferior good. When Duncan Thurly first reached adulthood many years ago, he eked out a living working at minimum wage jobs. His income was quite limited in those early lean years. When it came to demanding clothing, the best he could afford was denim blue jeans and white T-shirts. Khaki slacks and turtleneck sweaters were more to his liking at this time, but beyond his financial reach.

However, once Duncan worked his way up the occupational ladder and his income increased, he was inclined to modify his wardrobe. He purchased nothing but khaki slacks and turtleneck sweaters. As such, he no longer found the need for denim blue jeans and white T-shirts. His demand for denim blue jeans and white T-shirts decreased with his additional income. For Duncan, denim blue jeans and white T-shirts were inferior goods.

Of course, should Duncan have a decline in his income, such as what might happen if he is laid off from his high-paying job due to philosophical differences over the ownership of company office supplies, then he might be inclined to increase his purchases of denim blue jeans and white T-shirts once again.

Shifting the Demand Curve

Inferior Good

Now, consider how changes in buyers' income shift the demand curve for this inferior good.

• Increase in Income: An increase in buyers' income causes a decrease in demand and a leftward shift of the demand curve for denim blue jeans. Click the [Income Increase] button to demonstrate.


• Decrease in Income: A decrease in buyers' income causes an increase in demand and a rightward shift of the demand curve for denim blue jeans. Click the [Income Decrease] button to demonstrate.

A Normal Alternative

Depends on the Situation

Consider a good such as cable television.

• Inferior Good: A buyer with a great deal of income, such as the truly wealthy, might view cable television as an inferior good. An increase in income probably induces a decline in cable television services, as the buyer opts for live entertainment, satellite television, and other more expensive, but more preferred alternatives.


• Normal Good: A buyer lower down the income spectrum probably views cable television as a normal good. An increase in income likely triggers a proportional increase in cable television services, such as moving from basic cable to digital cable.

Income Elasticity