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Explain the difference between an inferior good and a normal good. |
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Answer» Solution :Normal Good 1. A normal good is one whose demand increases with an increase in the money income of the consumer. 2. Normal GOODS have positive income effect, e.g. if a consumer buys more of MILK for his family as his income rises, then milk will be called a normal good as shown in Diagram 1  Inferior Good 1. An inferior good is one whose demand falls with a rise in income of the consumer because he can now AFFORD to buy a normal (superior) good. 2. Inferior goods have negative income effect, e.g. if a consumer reduces the consumption of TONED milk when his income rises, then toned milk is an inferior good for that consumer, as shown in figer. 
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