Rising demand for inferior goods

In a downturn, demand for ‘inferior products’ tends to rise as real incomes fall. To label a product inferior is not to classify it as poor quality but instead to identify a negative relationship between income and quantity demanded. Typically inferior products tend to be basic, often low-priced products that consumers might turn to if they need to save some money. There will be higher priced alternatives that might be considered more of a luxury or a discretionary spend.

This BBC news article offers a window on early signs of a change in spending habits in the foodstores. Sales of baked beans are up - as is demand for the white bread that complements late-night beans on toast. And as staying in is the new going out, the volume of olive oil coming off the shelves is also increasing.

We must be careful to assume that just because demand for these and other products is increasing as the economy slides into a downturn, they are all inferior goods. Frequently there are price changes and other offers available that change the incentives for consumers.