What are normal vs inferior goods? (With examples)

By Indeed Editorial Team

Published 16 June 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

The relationship between normal and inferior goods is important because it helps us understand the price elasticity of demand. This refers to how sensitive consumers are to changes in price. When economists use this term, they're referring to whether a given percentage change in price is going to cause a bigger or smaller percentage change in the quantity demanded of a product (how much more or less of it people buy). In this article, we look at the difference between normal vs inferior goods according to what they are (with examples) and how consumer behaviour can affect them.

Difference between normal vs inferior goods

The idea behind normal vs inferior goods is that people are more likely to consume an inferior product if their income is low but switch to buying normal goods once their situation improves. Here's an example:

Example: A single mum who works two jobs to support her family is on low pay and has to buy cheap microwavable meals for dinner every night rather than making home-cooked meals. Not only is she too tired to cook, but she can't afford fresh ingredients.

After getting a new job that pays more, things start to change, and the mum has some excess money to spend on better produce and more time to cook healthy meals for her children. Normal and inferior goods are examples of products that people choose to consume based on their income.

What are normal goods?

Normal goods are generally considered 'normal' because they're what an economist would call 'standardised products'. This refers to products that are generally interchangeable with other products. An easy way to think about this is to imagine yourself at the grocer. If you can buy apples or oranges, then those items are typically considered normal goods. They tend to have a positive income elasticity of demand, meaning that for every 1% increase in income, there's a greater than 1% increase in demand for the goods. There are two types of normal goods:

Core normal goods

Core normal goods are products that are usually bought in large quantities and satisfy basic needs, such as food and shelter. These types of goods are generally considered to be necessities, so when income increases, the consumer is likely to buy more of them to meet their needs. An example of a core normal good would be eggs or milk.

Non-core normal goods

Non-core normal goods are products that don't necessarily provide for basic needs but enhances the consumer's lifestyle. The consumer is likely to buy more of these types of goods as their income increases. An example of a non-core normal good would be luxury clothes or vacation homes, as they're non-necessities that can be typically bought due to an increase in income.

Example of a normal good

A car is an example of both a core and a non-core normal good. This is because a non-flashy car is able to fulfil basic needs as it's responsible for transporting adults to work and children to school, making it an example of a core good. It's especially necessary if the consumer lives in an area where there isn't as much access to public transport. But a car can also be a non-core normal good because it can be subsequently upgraded to a more expensive brand or model due to a rise in income to enhance the consumer's lifestyle.

Related: What are normal goods? (Plus types and examples)

How does consumer behaviour affect normal goods?

Consumer behaviour affects normal goods in a variety of ways, but perceptions about the quality and the taste of a product are the two most common features that can make a difference on normal goods. For example:

The perception of the quality of normal goods

The most common way in which consumer behaviour affects normal goods is when consumers' perceptions of the quality of a good change. If people are happy with their current products and no longer seek alternatives, demand for those goods typically decreases. In this case, there's an inverse relationship between demand and price – as prices rise, demand falls. For example, if you're satisfied with your current car and do not feel it's necessary to look at other options, you may decide it's unnecessary to buy another car unless something breaks or wears down on your current vehicle.

The perception of the taste of normal goods

The second most common way is when consumers' perception of a product's taste changes. New technologies come out all the time, which means consumers have an incredible number of choices about what kind of goods they can choose from. For example, if a new technology that makes it easier to use certain features on a smartphone than before, you may decide you want one after all. This means customers are more likely to leave the older product behind, which would see their sales plummet.

What are inferior goods?

An inferior good is a commodity that people buy less of when their income rises. Inferior goods are low-quality products that are generally purchased when consumers have no other choice for meeting their needs. Canned vegetables are an example of an inferior good, as they tend to be more expensive than fresh vegetables but still have some nutritional value, although canned vegetables may be necessary for storage purposes.

Examples of inferior goods

Inferior goods include things like inexpensive clothing, household appliances and basic food items, but they can also be cheaper alternatives to more expensive products. Let's take ice cream as an example. When you're doing the food shop, you decide to treat yourself to a tub of ice cream. But you can't afford a branded tub, so you are bound to buy the supermarket's own brand instead, which in this case is an inferior good.

Inferior goods can also be thought of as 'goods of necessity'. These are products that are so important to consumers that it's necessary to have them regardless of cost. An example of this is petrol. This is because if your income goes up, you might be able to afford a better car or an extra holiday each year, but you still require petrol to get you from point A to point B.

How does consumer behaviour affect inferior goods?

Consumer behaviour affects inferior goods by changing the demand for these goods. When a consumer decides to purchase an inferior good, they're choosing to purchase something less desirable than other options. Inferior goods may be then viewed as a last resort for consumers who have no other choice. For example, if it's necessary for you to buy something quick and cheap, you may choose to purchase an inferior good like fast food or an off-brand version of something rather than spend more time searching for a higher quality option.

Inferior goods are typically cheaper than high-end products, so they can be more accessible to low-income people and those who are living on a tight budget. Although while they might be cheaper, they also tend to be less desirable because they aren't as high in quality as their high-end counterparts. There are two main consumer behaviours that affect inferior goods. For example:

The product's inferiority

The product's inferiority is an example of consumer behaviour that affects inferior goods. This is because consumers who are aware of the product's inferiority are often going to choose to avoid purchasing it. This can lead to decreased sales and overall demand for the product. Similarly, if there is no perceived difference between the superior and inferior goods, consumers may be more likely to purchase the superior good instead of the inferior ones as this is the more glamorous and uplifting option.

Related: What is the law of demand? Plus exceptions and examples

The product's price point

Inferior goods are also affected by consumer behaviour in that if a good level of quality is typically achieved for a certain price point, this can make an inferior good more appealing than a superior-good at a higher price. For instance, if you purchase an item from shop A at £100 and another from shop B at £300, both with similar quality, you may choose store A because it offers better value for your money. In some cases, consumers opt not to buy an inferior good because they do not want others to know they purchased cheap products.

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