Question

Explain the difference between an inferior good and a normal good.

Answer 1

Inferior goods are goods which have a negative relationship between income and quantity demanded. Assuming that other things remain constant, an increase in the consumer’s income will lead to a decrease in the quantity demanded and a decrease in the consumer’s income will lead to an increase in the quantity demanded.

Normal goods are goods which have a positive relationship between income and demand. Assuming that other things remain constant, an increase in the consumer’s income will lead to an increase in the quantity demanded and a decrease in consumer’s income will lead to a decrease in the quantity demanded.