The Difference Between Inferior and Normal Goods

In an introductory economics course, students will often be asked to differentiate between inferior and normal goods. This guide hopes to illuminate the differences between the two types of goods.

Normal Good:

For most items, having a higher income would result in you consuming more of those items. Consider, for example, filet mignon. If you have more income (and you aren't a vegetarian), you will end up consuming more filet mignons that you would with a lower income. In other words, quantity demanded rises as incomes rise. There is a positive association between quantity demanded and income. This can also be said as having a positive income elasticity of demand.

Inferior Good:

Now, consider an inferior good. These goods are not of poorer quality than other goods, as is suggested by the adjective "inferior." Instead, they are simply goods that you consume less of if your income rises. Consider, for example, ramen noodles. People with lower incomes (such as college students) will probably consumer more ramen noodles than they would if their incomes started to rise to a level where they could afford more expensive and more wholesome food. Thus, ramen noodles are an inferior good. In other words, quantity demanded of ramen noodles falls as incomes rise. There is a negative association between quantity demanded and income. This can also be said as having a negative income elasticity of demand.

Neither Normal Nor Inferior:

There are some items out there that are neither nor inferior goods. These are usually necessities that all people use. Consider, for example, a sponge. Most people need sponges to clean their kitchen. However, increasing your income will not directly make your kitchen any dirtier, so you will probably not buy any additional sponges. For items like these, in which a change in income creates no change whatsoever in the quantity demanded of the goods, the goods are neither normal goods nor inferior goods.

Test Yourself:

Are each of these goods normal, inferior, or neither? You'll find answers below.

a. Diamonds

b. Bus fares

c. Used cars

d. Laptop computers

e. Toothpaste

Answers:

a. Normal

b. Inferior

c. Inferior

d. Normal

e. Neither inferior nor normal-people who are interested in dental health will not change their toothpaste consumption even if their incomes change.

Now you understand the differences between inferior goods and normal goods. These descriptions are simply easy ways to describe if the quantity demanded of a good increases, decreases, or stays the same when incomes rise.