Inferior Good

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DEFINITION of 'Inferior Good'

A type of good for which demand declines as the level of income or real GDP in the economy increases. This occurs when a good has more costly substitutes that see an increase in demand as the society's economy improves. An inferior good is the opposite of a normal good, which experiences an increase in demand along with increases in the income level.

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BREAKING DOWN 'Inferior Good'

Inferior goods can be viewed as anything a consumer would demand less of if they had a higher level of real income. An example of an inferior good is public transportation. When consumers have less wealth, they may forgo using their own forms of private transportation in order to cut down costs (car insurance, gas and other car upkeep costs) and instead opt to use a less expensive form of transportation (bus pass).

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