# Normal & Inferior Goods in Microeconomics

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• 0:01 Types of Goods
• 1:10 Inferior Goods
• 2:08 Normal Goods
• 2:50 Lesson Summary
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Lesson Transcript
Instructor: Jennifer Lombardo
A consumer's income affects the types of products that they purchase. In this lesson, you will learn the definition of and differences between normal and inferior goods in microeconomics and how they affect consumer demand.

## Types of Goods

Do you think the amount of income you have determines the types of products and services you purchase? In fact, consumer demand for different types of products does change depending upon their level of income. Josie has just graduated college with a master's degree in mechanical engineering, and in the past has made about \$25,000 a year working part time while going to school. She recently accepted a job offer of \$70,000 with a top engineering firm. Let's take a look at how her income affects her purchasing of normal and inferior goods.

Our first task is to familiarize you with some basic microeconomic terms. A normal good refers to any good where there is a direct relationship between income changes and the demand curve. An inferior good is any good where there is an inverse relationship between changes in income and a demand curve. Most of Josie's life has been a financial struggle, and she has had a high demand for inferior goods. Let's start at that point in her life to illustrate an inferior good example.

## Inferior Goods

In the past, Josie's limited budget has made her have a high demand for inferior goods, such as generic products, used cars, pizza, discount clothing, and canned foods. Her lower income created a shift in the demand curve for those types of products. Now that Josie is making more money, her demand for inferior goods, like pizza, is decreasing. You can notice that, as her income increases, her consumption of pizza decreases from P to P1. Josie consumes less inferior goods (like pizza) as her income increases, hence the inverse relationships of inferior goods and income. Let's now take a closer look at how Josie's increase in income affects the demand curve for normal goods.

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