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What are Inferior Goods?
The goods that are purchased by consumers can be classified into normal goods and inferior goods. They are the two types of goods that are existent in the market. Let us take a look at the inferior goods here. Get Inferior Goods Macroeconomics Homework Help at Tutorspoint
An Example
There are a number of examples that can be stated in this case. They include tinned foods, frozen vegetables, and all the low-quality goods that people do not want to buy. In case of the normal goods, there is a negative income elasticity seen for the demand. They are exactly the opposite of normal goods. In case of the normal goods, with an increase in income, there is increased demand for these goods too.
The sales of inferior goods are considered to be counter-cynical in nature. This makes the company that is involved in the production of these goods also counter-cynical in nature. This way becomes resistant to the economic cycles in a relative manner. This is because they are subject to the income effects in this case, which are very strong in nature.
What are True Inferior Goods?
There are not many true inferior goods in the market. There are very few of them that are actually present in the market. But these goods may actually be beneficial to those for whom there is an increased need for cheap goods. This is possible when there is a decrease in the income of the people. There may not be many customers, but there are a number of them. The best example of this would be a pub that has cheap liquor rates. This would be the place that would be running at its best during the time of recession. This is when people want to go for cheaper options than going for the costlier ones.
What is the Recession
In the case of elasticity, it is negative in nature. But in times of recession, the demand for these goods actually tends to increase. This would depend upon the severity of the recession too.
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