Inferior Goods: A Utility Function Reflecting Product Quality and Quantity

Abstract

This paper theoretically derives a general utility function for inferior goods that accounts for the utility derived from both the quality and the quantity aspects of goods in a model with two substitutable consumption goods. We show the conditions under which a good becomes a normal, an inferior, or a Giffen good. We also define a new category of goods named demand decreasing with quantity coefficient (DDQTC) goods, showing that a Giffen good is always a DDQTC good and that a DDQTC good is always inferior if a certain condition holds. All these properties are numerically exemplified using two specific utility functions.