Inflection vs Word Formation

 The generation of the English plural butterflies from butterfly is an inflectional rule.

 

Compound phrases and words like dog catcher or handbag are examples of word formation.
 

Informally, word formation rules form "new" words (more accurately, new lexemes), while inflection rules yield variant forms of the "same" word (lexeme).
 Word formation is a process, as we have said, where one combines two complete words, whereas with inflection you can combine a suffix with some verb to change its form to subject of the sentence. For example: in the present indefinite, we use ‘go’ with subject I/we/you/they and plural nouns, whereas for third person singular pronouns (he/she/it) and singular nouns we use ‘goes’. So this ‘-es’ is an inflectional marker and is used to match with its subject. A further difference is that in word formation, the resultant word may differ from its source word’s grammatical category whereas in the process of inflection the word never changes its grammatical category.