Distinguish between an ordinary demand curve and a compensated demand curve

Ordinary demand curve refers to the graphical representation of demand for a product with respect to its price. It shows quantity demanded and the level of prices. Ordinary demand curve is also known as the Marshallian demand curve. It considers both income and substitution effect.

A compensated demand curve shows the graphical relationship of quantity demanded and the price level while keeping the level of utility constant. It means the compensated demand curve shows only the substitution effect and eliminates the income effect.

For normal goods, the ordinary demand curve is derived from the price consumption curve. Increase in price of good results in both income and substitution effect, and equilibrium quantity change. Ordinary demand curve is derived from the initial equilibrium quantity and final equilibrium quantity. While the compensated demand curve is derived by excluding the income effect of price change. Both ordinary demand curve and the compensated demand curve are downward sloping. The compensated demand curve in case of a normal good is steeper than ordinary demand curve.

For inferior goods also, the ordinary and compensated demand curve are derived through the same method. The change is that both compensated and ordinary demand curve in case of an inferior good is upward sloping because inferior goods do not follow the law of demand. The compensated demand curve is flatter than the ordinary demand curve in case of an inferior good.