Final answer:
An inferior good is one where the demand decreases as income increases, displaying a negative income elasticity of demand. As income levels rise, consumers tend to buy less of these goods, and the demand curve shifts to the left.
Step-by-step explanation:
A good for which the demand falls when income rises is known as an inferior good. An inferior good is characterized by a negative relationship between income level and the demand for that good. This means that as a consumer's income increases, the quantity demanded of the inferior good decreases, and conversely, when income falls, the demand for an inferior good increases.
We have learned about this concept in Demand and Supply. With normal goods, when people have higher incomes, they tend to buy more of those goods – the demand curve for a normal good will shift to the right, indicating a positive income elasticity of demand. For an inferior good, the opposite is true because the income elasticity of demand is negative. As income goes up, the demand curve for an inferior good will shift to the left.