Monday, January 25, 2010

Normal Goods vs Inferior Goods

In class this semester as well as last semester, we briefly discussed normal goods and inferior goods. A normal good is defined as a good for which demand increases when income increases, and for which demand falls when income falls. On the other hand, an inferior good is a good for which demand falls when income increases, and for which demand increases when income falls. Simple enough definitions.

However, then our teacher told us most goods are considered normal goods, but gave the example of Ramen noodles as an inferior good. This made me laugh, because personally, I enjoy Ramen noodles and I can’t think of a time when we haven’t had them, regardless of income increases or a promotion of my parents and/or myself. This got me thinking, what are more examples of inferior goods and normal goods?

The more I learn about economics, the more I see that economists seem to like to lump actions of people/concepts/goods into specific, clearly defined categories or groups. Then it hit me, there aren't really universally accepted inferior and normal goods. They can vary from person to person. For me a normal good is my iPhone, and an inferior good would be another phone. Yet, some of my friends would prefer a different phone over an iPhone, regardless of their high incomes just because they see a keyboard or other qualities important. And a Ferrari would be a normal good for most guys I know, but for me, I would never want a Ferrari, regardless of my income. Also, fast food may seem like an inferior good over a home cooked meal or another restaurant, yet a lot of people I know would rather go to Taco Bell than an expensive Mexican restaurant. Normal and inferior are subjective words, and each household and each person’s idea of an inferior and normal good will vary.


  1. Economist definitely lump things together because the public has so many different opinions. It truly is hard to answer a question when it comes to defining the difference between normal and inferior goods. It does seem simple to define but you really have to look at the general public’s opinion for the answer.

  2. The idea that there is no bright line between substitute goods and inferior goods is an interesting one. Keep it up!

  3. Interesting. I hadn't really thought about normal and inferior goods differing so much from person to person, but given your post, I'd have to agree with you. I suppose that these goods definitions really do depend on peoples tastes. I suppose economists draw lines and distinctions just so that they can better analyze things.

  4. I think the difference between inferior and normal can be shaped by a variety of factors including individual taste and personal wealth. I would like to believe that I would still hit Taco Bell if I won the lottery but I suppose some people wouldn't.