A good for which demand falls as income rises is called a

• A. Normal good
• B. Inferior good
• C. Luxury good
• D. Necessity

Answer: (B)

The main idea is that not all goods are bought more as people become wealthier. For some goods, higher income leads to buying less of them because people can afford nicer substitutes or move to higher-quality options. These are called inferior goods. The reason is that the income elasticity of demand for an inferior good is negative: when income increases, the quantity demanded decreases.

Think of practical examples: if someone’s income rises, they might swap cheap staples or low-cost options for better-quality or more desirable goods—buying fresher food, dining out, or purchasing new cars instead of used ones. As a result, the demand for the inferior good falls as income climbs.

To contrast with other categories, normal goods see higher demand as income rises, and luxury goods see a particularly large increase in demand as income grows. Necessities also rise with income but typically not as rapidly as luxuries.