In economic terms, what is an inferior good?

An inferior good is defined as a type of good for which demand decreases as consumer income rises. This is because as people have more income, they tend to purchase higher-quality substitutes instead, leading to a decline in the quantity demanded for the inferior good.

For example, if a consumer has a limited income, they may opt for less expensive, lower-quality food options. However, as their income increases, they might shift their purchases toward more expensive and higher-quality products. Therefore, the correct characterization of an inferior good is that it is purchased less as income increases, which aligns perfectly with the notion of how consumer preferences change with income levels.

Understanding this concept is crucial in the broader context of consumer behavior and market dynamics, as it influences both individual purchasing decisions and overall market trends.