Normal and Inferior

• Normal Good: A normal good exists when buyers are inclined to buy more of the good if they have more income. A normal good is so named because it represents the typical, or "normal" situation. An increase in income means buyers have a greater ability to purchase goods. As such, buyers are "normally" inclined to buy more if they have more income.


• Inferior Good: An inferior good exists when buyers are inclined to buy less of the good if they have more income. An inferior good is so named because it tends to be less expensive than more desirable goods. As such, when buyers have more income and can afford to buy the more expensive products, then they reduce their purchases of the inferior goods.

Shifting the Demand Curve

Buyers' Income
Normal Good Inferior Good

Now, consider how changes in buyers' income shifts the demand curve. The demand curve is affected in a different way for normal goods than for inferior goods.

• Normal Good: An increase in buyers' income causes an increase in demand and a rightward shift of the demand curve for a normal good. Click the [Income Increase] button under the Normal Good heading to demonstrate.

  A decrease in buyers' income causes a decrease in demand and a leftward shift of the demand curve for a normal good. Click the [Income Decrease] button under the Normal Good heading to demonstrate.



• Inferior Good: An increase in buyers' income causes a decrease in demand and a leftward shift of the demand curve for an inferior good. Click the [Income Increase] button under the Inferior Good heading to demonstrate.

  A decrease in buyers' income causes an increase in demand and a rightward shift of the demand curve for an inferior good. Click the [Income Decrease] button under the Inferior Good heading to demonstrate.

Not the Income Effect

• Buyers' Income Demand Determinant: Buyers' income is a demand determinant that affects the ability to purchase a good, given no change in the price of the good. The change in buyers' income causes a change in demand and a shift of the demand curve. With the buyers' income demand determinant, price is fixed and income changes.


• Income Effect: The income effect results from a change in demand price, which affects the purchasing power of a given amount of income. The change in purchasing power then causes a change in quantity demanded and a movement along the demand curve. With the income effect, price changes and income is fixed.