Effect of Decrease in Price of Inferior Goods on Quantity Demanded

Inferior goods are those goods whose demand decreases as the income of the consumer increases. These goods are generally of lower quality and cheaper compared to the normal goods. Examples of inferior goods include low-quality food items, second-hand clothes, and public transport.

When the price of an inferior good decreases, it means that the good has become relatively cheaper compared to other goods. This change in price has an effect on the quantity demanded of the good. The effect can be explained using the law of demand, which states that the quantity demanded of a good decreases as the price of the good increases, and vice versa.

The effect of a decrease in the price of inferior goods on quantity demanded can be explained as follows:

1. Income Effect: When the price of an inferior good decreases, the consumer's purchasing power increases. This means that the consumer can now buy more of the good with the same amount of income. However, since inferior goods are of lower quality, the consumer may choose to switch to normal goods as their income increases. Therefore, the quantity demanded of an inferior good decreases as the consumer's income increases.

2. Substitution Effect: When the price of an inferior good decreases, it becomes relatively cheaper compared to other goods. This makes the inferior good more attractive to consumers compared to normal goods, which are relatively expensive. However, as the consumer's income increases, they may choose to switch to normal goods, which are of higher quality. Therefore, the quantity demanded of an inferior good decreases as the consumer's income increases.

Conclusion

In conclusion, when the price of an inferior good decreases, the quantity demanded of the good decreases. This is because the consumer's income increases, and they may choose to switch to normal goods, which are of higher quality. Therefore, the law of demand holds for inferior goods as well, and the quantity demanded of an inferior good decreases as its price decreases.

For any type of good , if price decreases quantity demand increases . It is not an exception as it is not giffen good and all inferior goods are not giffen goods.