What happens to the demand for inferior goods when consumer income decreases?

When consumer income decreases, the demand for inferior goods tends to increase. Inferior goods are defined as those goods for which demand rises when consumer incomes fall, and conversely, demand decreases when incomes rise. This happens because consumers tend to switch from more expensive substitutes to these less expensive alternatives when their purchasing power is constrained.

For instance, if individuals experience a drop in income, they may opt for budget brands or lower-quality products instead of higher-priced items. An example of an inferior good might be generic groceries or public transportation. As consumer income diminishes, more people will turn to these options as their primary choice to accommodate their new financial realities.

The other outcomes presented do not align with the nature of inferior goods. Demand cannot decrease when income falls, remain unchanged, or become elastic in this context because each scenario contradicts the definition of what an inferior good is. The essence of inferior goods is their responsiveness to changes in consumer income, leading to an increased demand as incomes decline.