What are Normal and Inferior Goods?

When it comes to buying goods, consumer behavior fluctuates and this is especially the case when there’s a change in income. For this reason, companies sell a mix of goods that appeal to various consumers and their needs. While some people stick to similar buying patterns when their income increases, others may change the types of goods they consume. Normal and inferior goods are two ways to describe changes that happen in these scenarios.

Normal Goods

Most goods are normal goods. A normal good is one that has an increased demand when a consumer’s income increases. The price on these goods also tends to be fixed. Likewise, when a person’s income decreases, so does the demand for normal goods. When you think about it, consumers often spend more money or buy higher quality products when their income increases. This may look like spending more at restaurants, an increase in luxury travel, or switching from store brand products to more expensive ones.

Inferior Goods

An inferior good is opposite to a normal good–when a person’s income increases, their demand for inferior goods decreases. An important distinction to make is that inferior goods aren’t necessarily of lesser quality, they just have lower demand when people begin earning more. However, when wages decline due to unemployment or other factors, the demand for inferior goods increases.

Normal Goods Vs Inferior Goods

Normal goods and inferior goods are opposites when it comes to how income levels affect demand.

Examples of Normal And Inferior Goods

Travel

It’s possible to travel on a range of budgets. However, when there is more money to spend, it’s likely consumers will become more open to exploring. When income is limited, consumers may choose to travel less.

Transportation

Mobility is an essential need for most people but one’s income determines how they move around. Transportation as a normal good may look like buying a comfortable or luxury car to move around. Likewise, people may spend more on taxis or rideshare apps. As an inferior good, travel can look like using public transportation to get around, be it a bus or train, depending on the city.