The difference between an “inferior” good and a “normal” good in Economics is:
a. The demand for a normal good decreases as the price increases, which is not the case for an inferior good
b. The demand for a normal good increases as the price increases, which is not the case for an inferior good
c. The demand for a normal good decreases as household income increases, which is not the case for an inferior good
d. The demand for a normal good increases as household income increases, which is not the case for an inferior good
Amongst all the options, Option D is correct which says that “The demand for a normal good increases as household income increases, which is not the case for an inferior good”. Let us first understand what is the meaning of normal goods and inferior goods.
Normal Goods: There is a direct relationship between the demand for normal goods and the income of the household. For instance, if the income of the household increases, the demand for normal good increase and on the other hand, if the income of the household decreases, the demand for the normal goods decrease.
Inferior Goods:There is an inverse relationship between the demand for inferior goods and the income of the household. For instance, if the income of the household increases, the demand for inferior goods decrease and on the other hand, if the income of the household decreases, the demand for the normal goods increase.