Income Effect With Inferior Goods

In contrast consumer will gain satisfaction by consuming less of an inferior goods following an increase in income.

Income effect with inferior goods. Thus the consumption of inferior goods will fall with a rise in income. Substitution and income effects for an inferior good. Income and substitution effects on inferior goods inferior goods are cheap alternatives for normal goods. An inferior good is one whose demand drops when people s incomes rise.

People use inferior goods when they are unable to afford normal goods or expensive goods. As the income rises the consumer will substitute the consumption of an inferior goods with a superior goods and will maximize satisfaction.