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The major difference in both terms is that Normal goods are positively related to income whereas Inferior goods are inversely related to income. Normal Goods are like necessities goods demanded by all the consumers whereas Inferior Goods are associated with a wealth level of consumers.
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To distinguish these terms, we must clear the meaning of these terms:
Meaning of Normal Goods:-
These refer to the goods which go positively with income. As the income increases, the quantity demanded of consumer goods increases but up to a certain limit, other things remain the same.
Meaning of Inferior Goods:-
These refer to the goods for which demand decreases when income increases and vice versa. For example, public transportation, generic grocery products, and kerosene, etc.
Chart of Difference:
Basis of Difference | Normal Goods | Inferior Goods |
| Meaning | These are the goods for which demand increases with a rise in income and vice-versa. | These are the goods for which demand decreases with a fall in income and vice-versa. |
Price-Demand Relationship | In the case of these goods, there is always an inverse relationship between the price of commodity and quantity demanded. | There may or may not be an inverse relationship between the price of the commodity and the quantity demanded. |
| Income Effect | The income effect is positive here. | For these goods, the income effect is negative. |
| Essentials of life | These goods may or may not be the essentials of life. | These goods refer to the essentials of life. |
Degree of Income Elasticity | Less than One. i.e. EY<1 | Less than zero. i.e. EY<0. |
| The Engel curve is upward sloping for these goods as showing income elasticity. | For these goods, the Engel curve is downward sloping as showing income elasticity. | |
| The price consumption curve is downward sloping as it indicates the effect of price on quantity demanded. | Here, the price consumption curve is upward sloping as it indicates the effect of price on quantity demanded. | |
Examples | Some of the examples are- Television, branded clothes, and expensive houses, etc. | Some of the examples are- bread, cereals, peanut butter, and non-branded products, etc. |
Download the chart: –
If you want to download the chart please download the following image and PDF file:-
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Conclusion:
Thus, both types of goods are considered while estimating the tastes and preferences of customers in the market. The quantity demanded of both these goods by the consumers depends upon the income level of the consumer.
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