How do we distinguish between Normal goods and Inferior goods

Answer :

Normal goods are those in case of which there is a positive relationship between income and quantity demanded.Quantity demanded increases in response to increase in consumer’s income and quantity demanded fall with fall in consumer’s income.

Inferior goods are those in case of which there is a negative or inverse relationship between income and quantity demanded. Quantity demanded decreases in response to increase in consumer’s income and quantity demanded rise with fall in consumer’s income.

For example, the demand for an inferior food like maize may decrease when income of the consumer increases beyond a particular level as he may substitute maize by a superior food like wheat or rice.

Briefly, in case of normal goods income effect is positive, while in case of inferior goods income effect is negative.

Also read factors affecting demand