Normal Goods vs. Inferior Goods: Know the Difference
By Shumaila Saeed || Updated on December 25, 2023
Normal goods see increased demand with rising income, while inferior goods see decreased demand as income grows.
Key Differences
Normal goods are products whose demand increases as consumer income rises. In contrast, inferior goods are those whose demand decreases as income increases. This distinction is based on income sensitivity.
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Dec 22, 2023
The quality and perception of normal goods are typically higher, leading consumers to buy more as they can afford them. On the other hand, inferior goods are often perceived as lower quality, and consumers tend to shift away from them when they have more financial resources.
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Dec 22, 2023
For normal goods, an increase in income results in a proportional increase in demand. Conversely, for inferior goods, an increase in income leads to a reduction in demand, as consumers opt for more premium options.
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Dec 22, 2023
Examples of normal goods include new cars, high-quality clothing, and organic foods. In contrast, inferior goods might include used cars, generic brand foods, and budget clothing.
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Dec 22, 2023
The elasticity of demand for normal goods is positive, meaning it moves in the same direction as income. In the case of inferior goods, this elasticity is negative, indicating an inverse relationship with income changes.
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Dec 22, 2023
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Comparison Chart
Consumer Preference
Preferred with higher income
Preferred with lower income
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Dec 22, 2023
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Normal Goods and Inferior Goods Definitions
Normal Goods
Products whose demand increases with rising consumer income.
As her salary increased, Maria started buying more organic foods, a typical normal good.
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Dec 14, 2023
Inferior Goods
Items whose consumption falls when consumer income grows.
Generic brand groceries, inferior goods, are less purchased by those with rising incomes.
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Dec 14, 2023
Normal Goods
Products linked positively to income changes in terms of demand.
High-end electronics are normal goods, seeing increased sales in times of economic prosperity.
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Dec 14, 2023
Inferior Goods
Goods reflecting a standard of living that declines with increased income.
Second-hand clothing, an inferior good, is often replaced by designer labels as incomes rise.
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Dec 14, 2023
Normal Goods
Goods reflecting a standard of living that improves with income.
Fine dining experiences, typical normal goods, are more frequented by those with higher incomes.
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Dec 14, 2023
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Inferior Goods
Products inversely linked to income changes in terms of demand.
Used cars are inferior goods, as people tend to buy new cars when they can afford them.
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Dec 14, 2023
Normal Goods
Items whose consumption rises in tandem with consumer income.
Designer clothing, a type of normal good, becomes more popular as people earn more.
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Dec 14, 2023
Inferior Goods
Goods less desirable as financial conditions improve.
Budget airlines are considered inferior goods, as people opt for premium airlines with higher incomes.
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Dec 14, 2023
Normal Goods
Goods that are more desirable as financial circumstances improve.
Luxury cars are considered normal goods, as people often buy them when they have higher incomes.
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Dec 14, 2023
Inferior Goods
Products whose demand decreases as consumer income rises.
As John's income increased, he stopped buying instant noodles, an inferior good.
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Dec 14, 2023
Repeatedly Asked Queries
How does income affect the demand for normal goods?
As income rises, the demand for normal goods increases.
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Dec 22, 2023
What is an example of a normal good?
An example of a normal good is a new, high-end smartphone.
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Dec 22, 2023
What defines a normal good?
Normal goods are those whose demand increases with higher consumer income.
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Dec 22, 2023
Can you give an example of an inferior good?
A common example is generic or store-brand food items.
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Dec 22, 2023
What happens to the demand for normal goods in an economic downturn?
Demand typically decreases during economic downturns.
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Dec 22, 2023
Are normal goods always expensive?
Not necessarily; they're just more desirable with higher income.
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Dec 22, 2023
What is the income elasticity of demand for normal goods?
The income elasticity of demand for normal goods is positive, indicating that as income rises, demand also rises.
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Dec 22, 2023
What defines an inferior good?
Inferior goods are those whose demand decreases as income increases.
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Dec 22, 2023
Why do people buy less of an inferior good as they become richer?
They often opt for higher-quality alternatives.
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Dec 22, 2023
What happens to the demand for normal goods during a recession?
During a recession, demand for normal goods tends to decrease because people have lower incomes.
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Dec 22, 2023
Do inferior goods have substitutes?
Yes, inferior goods usually have substitutes, but people may choose them when their incomes are lower.
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Dec 22, 2023
Can normal goods become inferior goods?
Yes, if a consumer's preferences change, a normal good for them may become an inferior good, and vice versa.
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Dec 22, 2023
Is public transportation typically considered an inferior good?
Yes, public transportation is often seen as an inferior good because people tend to use it more when they can't afford private cars.
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Dec 22, 2023
Can inferior goods become normal goods?
Yes, if a consumer's income increases enough, what was once an inferior good for them may become a normal good.
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Dec 22, 2023
What is the income elasticity of demand for inferior goods?
The income elasticity of demand for inferior goods is negative, indicating that as income decreases, demand increases.
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Dec 22, 2023
What happens to the demand for inferior goods during economic prosperity?
During economic prosperity, demand for inferior goods tends to decrease because people have higher incomes.
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Dec 22, 2023
Are all normal goods necessities?
No, not all normal goods are necessities. Some are luxury items or discretionary purchases.
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Dec 22, 2023
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About Author
Written by
Shumaila SaeedShumaila Saeed, an expert content creator with 6 years of experience, specializes in distilling complex topics into easily digestible comparisons, shining a light on the nuances that both inform and educate readers with clarity and accuracy.
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