What defines an Inferior Good?

An inferior good is characterized by a decrease in demand as consumer incomes increase. When individuals experience an increase in their income, they tend to purchase less of these goods because they are typically lower-quality or cheaper alternatives to more desirable goods. As income rises, consumers shift their preference to higher-quality substitutes, leading to a decline in demand for these inferior goods.

For example, consider a scenario where people buy instant noodles due to their low cost during tough financial times. If their income rises, they might choose to buy fresh pasta or gourmet meals instead. This behavior illustrates that inferior goods are inversely related to consumer income, which is precisely what makes the correct choice defining an inferior good.