In economics, an inferior good is a good whose demand decreases when consumer income rises, unlike normal goods, for which the opposite is observed. Inferiority, in this sense, is an observable fact relating to affordability rather than a statement about the quality of the good. There are many examples of inferior goods, including cheap cars, public transit options, payday lending, and inexpensive food. The shift in consumer demand for an inferior good can be explained by two natural economic phenomena: the substitution effect and the income effect.
An item such as non-branded grocery products are common inferior goods. There is no set criteria of what constitutes an inferior good, but economists refer to an inferior good as any item preferred less when disposable consumer income increases.
In economics, a normal good is a type of a good which experiences an increase in demand due to an increase in income, unlike inferior goods, for which the opposite is observed. When there is an increase in a person's income, for example due to a wage rise, a good for which the demand rises due to the wage increase, is referred as a normal good. Conversely, the demand for normal goods declines when the income decreases, for example due to a wage decrease or layoffs.
The graph shows the change in demand for both normal goods and luxury goods due to a change in income. When the income rises from 500 to 700, the quantity demanded for normal goods rises from 800 to 900.
