Difference Between Normal Goods vs. Inferior Goods

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Main Difference

The main difference between normal goods and inferior goods is that normal goods are goods whose demand rise when consumer’s income rise and inferior goods are goods whose demand decline when consumer’s income rise.

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Normal Goods vs. Inferior Goods

Normal goods are goods whose demand increases with an increase in consumers’ income. Inferior goods are goods whose demand decreases when the consumers’ income increases. A normal good has positive, and an inferior good has negative elasticity of demand. In normal goods due to increase in your budget, you forego consumption of a good that gave you less utility and switches to the new product as it gives you more satisfaction whereas it is inferior because it gives you less satisfaction and you switch to better products if your budget permits. At lower prices, people prefer normal to inferior, and at higher prices, they prefer inferior to normal.

Comparison Chart

Normal GoodsInferior Goods
Normal goods are the goods whose demand go up with the increase in consumer’s revenue.Inferior goods are the goods whose demand falling with the rise in consumer’s revenue.
Income Elasticity
Positive but less than oneNegative, i.e., less than zero
Substitution Effect
More of a good bought because it is relatively cheaper as compared to its substitutes.The good is cheaper, so more is purchased.
Income Effect
More bought because an increase in the purchasing power increases consumption.Less inferior goods bought in favor of preferred substitutes when real income increase.
Preferred When
Prices are lowPrices are high
The relationship between income changes and the demand curve
Direct RelationshipInverse Relationship
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What are Normal Goods?

A normal good is one whose demand increase as people’s incomes or the economic rise. A normal good determined as having an income elasticity of demand coefficient that is positive, but less than one. A normal good, also named a necessary good. A normal good has income flexibility of demand that is certain, but less than one. Income flexibility of demand measures the magnitude with which the quantity demanded of good changes in reaction to a change in income. If you have a small income, then you’ll possibly buy the lowest quality or cheap brand of good. But if your income increases, you’re probably going to buy a higher quality, more expensive version of that same good. It is used to perceive changes in consumption patterns that result from changes in purchasing power. Examples of normal goods contain food staples, clothing and household appliances. In some cases, the demand for a normal good will rise at such a quick rate you will have to increase your production efforts. There are two types of normal goods: the necessity of goods and luxury goods.

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What are Inferior Goods?

An inferior good is an economic condition that describes a good whose demand drops when people’s incomes rise. This medium occurs when a good has more costly substitutes that see an increase in demand as incomes and the economy improve. Inferiority, in this sense, is a perceivable fact relating to affordability rather than a statement about the quality of the good. As a rule, these goods are affordable and adequately fulfill their purpose, but as more costly substitutes that offer more pleasure (or at least variety) become available, the use of the inferior goods diminishes. Inferior goods are anything a consumer would demand less of if they had a higher level of real income. They may also be related to those who typically fall into a lower sociology-economic class. It’s important to mark that the term inferior good refers to its affordability, instead of its quality, even though some inferior goods might be of lower quality. The demand for inferior goods reduces as income increases or the economy enhances. When this occurs, consumers will be more willing to spend on more costly substitutes. There are many examples of inferior goods. Some of us may be more well known with some of the routine inferior goods we come into with, interrelating instant noodles, hamburger, canned goods, and frozen dinners. When people have lower incomes, they tend to buy these kinds of products. But when their incomes rise, they often give these up for more expensive items. Inferior goods can be a financially smart purchase for many people. When you’re trying to live on a budget, inferior goods can be a great way to lower costs and still get the job done.

Key Differences

  1. Normal goods are goods whose demand rises with an increase in the consumer’s income; on the other hand, inferior goods are goods whose demand decreases with an increase in consumer’s income beyond a certain level.
  2. At falling prices, consumers choose normal goods to inferior ones. Unlike, at uprising prices, consumers would like to have inferior goods rather than normal goods.
  3. Income flexibility of demand for normal goods is positive but less than one. On the other hand, income flexibility is negative, i.e. less than zero.
  4. Weather of normal goods, there is a straight relationship between income changes and the demand curve. Conversely, there is an oblique relationship between income changes and demand curve, in inferior goods.

Conclusion

Consumer goods and service divided into four broad categories, for income-demand review, which are necessary consumer goods, inferior goods, normal goods, luxury goods. Normal goods are a total opposite of inferior goods, as in when the prices are low people switch to normal goods but when there is a price rise, they prefer inferior goods to normal goods.