Income Elasticity of Demand for Inferior Good

Definition of Inferior Good
An inferior good is defined as a good whose demand decreases as income increases, and vice versa. These goods are generally considered to be of lower quality or less desirable than other goods, and so as a consumer's income increases, they tend to substitute inferior goods for higher-quality alternatives.

Income Elasticity of Demand
Income elasticity of demand measures the responsiveness of demand to changes in income. It is calculated by dividing the percentage change in quantity demanded by the percentage change in income.

Negative Income Elasticity for Inferior Goods
For inferior goods, the income elasticity of demand is negative, as the demand for these goods decreases as income increases. This is because as income increases, consumers tend to purchase higher-quality alternatives, which are generally more expensive than inferior goods.

Example of Inferior Good
An example of an inferior good is generic brand food products. As a consumer's income increases, they may switch to higher-quality, more expensive brand-name food products, leading to a decrease in demand for generic brands.

Conclusion
In summary, the income elasticity of demand for inferior goods is negative because as income increases, the demand for these goods decreases. This is due to consumers substituting higher-quality alternatives for inferior goods as their income increases.