Difference Between Normal Goods and Inferior Goods

The goods whose demand tends to increase as the income of the consumer rises are called normal goods. As against this, inferior goods are the goods which encounter a fall in demand as the income of consumer rises.

Income is the basic determinant of the market demand which determines the purchasing power of the consumer. Therefore, the individuals who have higher disposable incomes spend the larger part of their incomes on consumer goods and services as compared to lower incomes.

Income elasticity of goods describes some significant characteristics of the demand for goods in question. When income elasticity is zero, the quantity demanded is unresponsive to changes in income. When income elasticity is more than one, then there is an increase in quantity demanded. When income elasticity is less than one, then there is a decrease in quantity demanded. So, here we are talking about the difference between normal goods and inferior goods, i.e. how income affects the demand curve.

Content: Normal Goods Vs Inferior Goods

1. Comparison Chart
2. Definition
3. Key Differences
4. Conclusion

Comparison Chart

Basis for Comparison	Normal Goods	Inferior Goods
Meaning	Normal goods are the goods whose demand goes up with the rise in consumer's income.	Inferior goods are the goods whose demand falls down with the rise in consumer's income.
Demand Curve
Income Elasticity	Positive	Negative
Relationship between income changes and demand curve	Direct Relationship	Inverse Relationship
Preferred when	Prices are low	Prices are high
Examples	iphone, LG LED TV, etc.	Coarse Cloth, Cycle, etc.

Definition of Normal Goods

Normal goods refer to the goods which are demanded in increasing quantities as the income of consumer rises and in decreasing quantity as the income of consumer drops, but price remains same. Although, the rate of increase in demand will be lower than the increase in income. Furniture, clothing, automobiles are some common examples which fall under this category.

The quantity demanded of normal goods goes up with the rise in consumer’s real income but at different rates and at different levels of income, i.e. the demand for good increases at a faster rate with an increase in income, however, slows down with a further rise in income.

Income Demand Curve

Definition of Inferior Goods

In economics, inferior goods do not mean sub-standard goods but is relates to the affordability of the goods. These goods are the one whose demand drops with the increase in consumer’s income and vice versa. Such goods have better quality alternatives.

This concept can be understood with an example, bidi and cigarettes are two products, which are consumed by the consumers. Suppose both the demand curve of both the products is downward sloping however if the consumer’s income goes up, then they will start buying cigarettes instead of bidi. The main cause of this mindset of customers is that the commodity is deemed to be inferior if there is a fall in its demand when there is a rise in their income, beyond a particular level.

Income Demand Curve

Conclusion

Consumer goods and services are bifurcated into four broad categories, for the purpose of income-demand analysis, which are essential consumer goods, inferior goods, normal goods, luxury goods. Normal goods are a complete 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.