Normal and Inferior Goods

Normal goods are goods for which demand increases as income increases, and demand decreases as income decreases. Examples of normal goods include luxury items such as high-end clothing, jewelry, and expensive cars.

Inferior goods are goods for which demand decreases as income increases, and demand increases as income decreases. Examples of inferior goods include low-quality food items, used cars, and discount clothing.

The distinction between normal and inferior goods depends on the income level of the consumer. A good that is inferior for one consumer may be normal for another consumer with a lower income level. Similarly, a good that is normal for one consumer may be considered a luxury item for another consumer with a higher income level.